March 13th, 2009
After months of state bans on foreclosures, falling homes prices and rising unemployment are once again fueling bank repossessions.
Rising unemployment is delivering another blow to the depressed U.S. housing market.
After months of declines in the number of foreclosures despite rising mortgage defaults, with a barricade of state and lender moratoriums preventing repossessions, foreclosures rose 6% in February from the month before, with 209,631 filings in all, according to Irvine, Calif.-based data firm RealtyTrac. Compared to the corresponding month a year ago, foreclosures were up 30%.
This was highly surprising considering there were foreclosure moratoriums in place at the four largest U.S. banks–Citigroup (nyse: C - news - people ),JPMorgan Chase (nyse: JPM - news- people ), Bank of America (nyse:BAC - news - people ) and Wells Fargo (nyse: WFC - news - people )–which service 55.0% of mortgages. Government-controlled mortgage giants Freddie Mac (nyse: FRE - news - people ) and Fannie Mae (nyse: FNM - news - people ) have halted activity as well, and they own or guarantee half of all U.S. mortgage debt.
While these banks may have stopped some foreclosures, recently expired state bans and exhausted delays resulted in a flood of actions. Such was the case in Florida and New York, where there were increases of 14% and 23% from the month before, respectively.
The failure of this concerted effort casts doubt on a new plan to stem foreclosures put forth by the Obama administration, which uses to taxpayer dollars to provide incentives for the mortgage industry to get millions of at-risk borrowers into loans they can afford. (See “Loan Modification Plan Gets Sweeter”)
More important than failed policies may be changing realities: Rising unemployment has begun spurring bank repossessions. States that never had a housing boom to speak of, such as Illinois, Oregon, and Idaho, are now among the 10 states with the highest rates of foreclosure. These states had January jobless rates of 7.9%, 9.9% and 6.6%, respectively, according to data released by the U.S. Department of Labor on Wednesday.