This is a ignominious record to be sure: according to a Bloomberg article by Dan Levy, home seizures due to foreclosure hit an all-time high in September as lenders seized more than 102,000 houses according to a RealtyTrac report. This is an increase over August, when more than 95,000 homes were seized, which was also the record at the time. Foreclosure filings were also up from the month prior, increasing to 347,000 in September.
Nearly 2.5 million homes have been seized by lenders since the onset of the financial crisis, and some estimates suggest there could be as many as 6.5 million more foreclosures on the way. Currently about one quarter of U.S. homeowners have negative equity in their homes, and another quarter are on the verge of having negative equity. These homeowners are among the most susceptible to foreclosure.
Foreclosed property sales accounted for nearly a third of home sales in Septmeber, and in some markets such as Florida or Arizona they accounted for a far greater percentage. It remains to be seen how the current foreclosure mess will affect foreclosures, home seizures, and the sale of foreclosed and distressed properties. In response to the fiasco, GMAC/Ally and JP Morgan Chase have suspended foreclosures in 23 judicial foreclosure states, while Bank of America has suspended all foreclosures nationwide.
Due to the mortgage foreclosure mess, some title insurers have stopped offering title insurance on some foreclosed properties, which effectively renders them unsellable except for cash sales as lenders will generally not finance a property that lacks title insurance. This will obviously put a huge damper on the sale of distressed properties, which will hurt many real estate markets. What will happen next month? Stay tuned.
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