New figures last week from RealtyTrac showed that foreclosure activity declined over the first six months of the year in nine of the 10 large metropolitan areas with the highest foreclosure rates.
However, most of the 206 metropolitan areas with 200,000-plus residents didn't fare as well. In fact, three out of four posted year-to-year increases in their foreclosure rates. Seventeen of the 20 hardest-hit areas were in Florida and California.
In the first half of 2010, more than 1.6 million U.S. properties were hit with foreclosure filings, which include bank repossessions, default notices and auction sale notices. That's up 8 percent from the first six months of 2009 and puts the U.S. on pace to top 3 million filings this year, including more than 1 million bank repossessions. While subprime borrowers and bad loans led the surge in foreclosures in 2008 and 2009, this year's wave comes from homeowners who've lost their jobs.
The numbers reflect the widespread and continued fragility of local housing markets amid a largely jobless recovery. They also raise questions about the effectiveness of programs designed to fight foreclosures, such as the Obama administration's Home Affordable Modification Program.
"If unemployment remains persistently high and foreclosure prevention efforts only delay the inevitable, then we could continue to see increased foreclosure activity and a corresponding weakness in home prices in many metro areas," said James Saccacio, the chief executive officer of RealtyTrac.
The Chicago-Joliet-Naperville metro area is evidence. Between June 2009 and June 2010, the area led the nation with 76,000 job cuts, according to government data. Not coincidentally, foreclosure activity in the Chicago area for the first half of 2010 was up 23 percent over last year; the area's 78,000 properties that received foreclosure filings ranked third highest in the nation.Banks lack incentive
From the Bush administration's HOPE for Homeowners program to the TARP-funded HAMP program, community groups, consumer advocates and homeowners say anti-foreclosure programs have been largely ineffective because banks don't have a strong incentive or mandate to modify loans that favor them financially.
Government officials envisioned the Home Affordable Modification Program helping 3 million to 4 million homeowners avoid foreclosure by 2012. Borrowers who receive permanent modifications of their home loans under HAMP save a median of
36 percent about $510 a month off their original mortgage payments.
However, of more than 3.1 million eligible delinquent loans, only 389,000 have been modified permanently, according to the most recent government figures. An additional 364,000 loans are in trial, or temporary, modification plans that could become permanent, but critics say that seldom occurs. More than 520,000 of these plans ended up being canceled.
Real Estate Outlook: 10 Percent Decline in Home StartsHome sales take unexpected dip