Foreclosure Patterns Shifting

Econintersect:  The numbers of foreclosures are decreasing in some of the states hardest hit by the housing bubble and subsequent collapse.  The patterns are following closely along the lines that divide the two legal procedures for foreclosure:  judicial process and non-judicial process.  In a judicial process the foreclosure proceedings must go through a court hearing protocol that has slowed the foreclosure process with examination of the mortgage and title documentation problems resulting from shortcuts implemented in the securitization process.  The non-judicial process is purely administrative and has not been impeded as much.

The states leading the improvement and the slowing in foreclosures have been summarized by Bloomberg:

Home loans that were delinquent or in foreclosure fell in three states hit hard by the housing market collapse, dropping 19 percent in Nevada, 21 percent in California and 25 percent in Arizona in the year through Nov. 30, Lender Processing Services Inc. reported today. At the same time, they rose 7.4 percent in New Jersey, 5.2 percent in Connecticut and 2 percent in New York, as mandatory judicial procedures delayed seizures.

Meanwhile the Federal Reserve has a graph that shows just how deeply the collapse in housing prices has impacted household wealth with $7 trillion of home equity just wiped out.  To provide some perspective, this is almost half the size of the national debt!

The theme of the Fed paper centers on the need for the government to be more aggressive in driving  refinancing of underwater mortgages.

Sources:  LinkedFA, Bloomberg and Federal Reserve White Paper