Foreclosures on Hold for Holidays as Housing Market Slowly Recovers

With an improving economy and programs aimed at helping homeowners stay current with their mortgages, housing-market analysts say that 2012 will prove to be a turnaround year for homeowners and the country. In addition, mortgage giants Freddie Mac and Fannie Mae, along with Bank of America, announced that they would suspend bank repossessions of homes from mid-December through Jan. 2.

As the year winds down to a close, real estate analysts found that 1.1 million fewer foreclosures started in 2012 than in 2010, which represents a drop of about 35 percent. RealtyTrac, a California-based real estate research company, said that home loan delinquency rates are also falling. At its peak, about 1.7 million borrowers fell behind in mortgage payments. This year, about 1.4 million did the same.

Daren Blomquist, a RealtyTrac vice president, said the many programs aimed at helping homeowners have had a cumulative effect.

“Individually, the programs didn’t always work as touted. But in combination together, they worked. The government kind of waged a war of attrition, and it was a lot of things together that helped improve matters,” he said.

Low Interest Rates Push Sales Up

Economists said the historically low interest rates have spurred the sales of single-family homes to a rate of 5 million in the third quarter. At the same time, the nation’s jobless rate continues to creep down, from 10 percent in 2009 to 7.9 percent in October. All of this is driving home sales up.

Analysts say the improvements happened because banks have been pushed to make changes that might not have ordinarily happened. Following the 2011 “robo-signing” scandal, in which documents were signed without proper review, analysts predicted an uptick in foreclosures that would destabilize the market. In January, the Federal Reserve Bank of New York estimated that up to 1.8 million properties would face foreclosure in 2012. Instead, the wave of foreclosures never came, even after the nation’s five biggest mortgage servicers reached a $25 billion settlement in February. By the end of the year, an estimated 650,000 homes will go through foreclosure, RealtyTrac’s Blomquist said.

Foreclosure Process Slows

Banks have increased foreclosure alternatives, including debt modifications, debt forgiveness and approving short sales. This slowing of the foreclosure process allowed the banks to avoid taking losses on non-performing loans, an analyst with Graham Fisher & Co. in New York told Bloomberg News. Home prices rose 3 percent in September – the most since 2010. The median price of an existing home sale jumped 11 percent from last year and showed its sharpest annual increase since 2005.

In addition, there are programs that are aimed at creating goodwill. On Monday, Freddie Mac and Fannie Mae, as well as Bank of America, said they will give borrowers facing foreclosure a break for the holidays. The suspensions won’t change the pre- and post-foreclosure activities, but homeowners will get a break for a few weeks.

“The holidays are a chance to be with loved ones and we want to relieve some stress at this time of year,” Terry Edwards, executive vice president of Credit Portfolio Management at Fannie Mae, told CNNMoney.