Will the Foreclosure Rate Decline
In 2013 Just As Bankruptcy Filing Did in 2012?
By Bob P Jones
Now that we have entered 2013 many Americans are wondering what is going to happen to the economy. The mainstream media keeps reporting that everything is getting better with unemployment going down, new housing starts up and real estate once again starting to move. While some of that information is true the media is not telling the entire picture. Regionally, there are some areas that have hit bottom where investors have found value in the stock of houses has declined causing prices to increase. Looking at this through rose-colored glasses makes it easy to see why the word recovery gets tossed around so much. One reason the real estate bubble burst in 2007 is because Wall Street, DC and Main Street stopped assessing the housing market truthfully. In fact, when housing prices were increasing the Department of Commerce removed it from the inflation numbers. Of course the government didn’t want to show house prices doubling because that would take a huge hit on inflationary numbers and cause the Fed to increase interest rates which in turn would slow the economy. Instead, they just lit it on fire and let it go forcing many Americans into foreclosure and bankruptcy filing.
Since 2007, foreclosure has claimed more than 4 million homes nationwide and was on a tear until the Robo-Signing scandal of 2010. When this hit banks nearly halted the processing of all homes in foreclosure to make sure that the I.’s were dotted and the T.’s were crossed before grabbing homes with foreclosure and end up being sued by the debtor. With all this going on it created an artificial decrease in the foreclosure rate. In 2011, only 830,000 homes were foreclosed on. During this time, banks also started increasing loan amounts and credit card balances to debtors. This caused the decline in Americans filing bankruptcy because they could now kick the can down the road and delay their bankruptcy filing.
Now that 2013 is here many experts are predicting an increase or second wave of foreclosures to hit the US. Technically, this is nothing more than the distressed inventory that banks were hanging on to with the idea to avoid collapsing the real estate market further. Currently, the average time for a mortgage to transition from a default to a foreclosure is about two years. Now that the banks are planning to ramp up their foreclosure departments many mortgage professionals are expecting the rates to go up significantly this year. According to RealtyTrac there were over 1.5 million homes in foreclosure in 2012. With that number expected to increase due to the large number of mortgage holders behind at least two payments, some are expecting this number to double in 2013.
This brings me to another point if these numbers are on the road to an increase, the bankruptcy filing number should also increase shortly after. It’s only a matter of time before it’s time to pay the piper. Most Americans are living way beyond their means and in a recent study that showed that the average American household is only three weeks away from filing bankruptcy. This is living on the edge and instead of taking out more credit, these individuals should be seeking the advice of a bankruptcy attorney. A bankruptcy attorney should be able to point a financially distressed individual in the right direction or at least may be able to talk some sense into them. 2013 will definitely be an interesting year economically as the government is also struggling to make ends meet by running a $1 trillion budget deficit. It doesn’t take a rocket scientist to figure out that this is going to end bad for all of us.