RealtyTrac: Foreclosure Filings Set New Record In July

Real Estate Broker/Owner

According to RealtyTrac, foreclosure filings set a new record in July as they rose 7% from June and are up 32% year over year.

According to James J. Saccacio, RealtyTrac's chief executive, "July marks the third time in the last five months where we've seen a new record set for foreclosure activity".

In other words, despite calls of a housing bottom by CNBC's Jim Cramer and even the AP, the housing market is still deteriorating and home values are still eroding.

This escalation of foreclosure activity also brings into question the effectiveness and long-term sustainability of the Obama Administration's $75 billion loan modification program which has under-performed due to weak participation by major banks, namely Bank of America and Wells Fargo. 

Ironically, both Bank of America and Wells Fargo have been hit by massive surges in the amount of non-performing loans during their recent quarterly earnings reports.  Wells Fargo showed a 45% increase in non-performing assets when compared to the first quarter.  Bank of America's non-performing assets jumped 21% from the first quarter.  

What all of this data points to is that foreclosures, in addition to driving down home values, are also continuing to put pressure on bank's balance sheets

Assuming that banks actually do participate in the loan modification process, and that remains to be seen, it is only a temporary stop-gap measure.  The greater systemic risk to the housing market is that home values are still falling and more homeowners are being plunged underwater.

Deutsche Bank is estimating that approximately half of all mortgages will be underwater by 2011.  

The solution is for a new fiscal policy, the reform of Tax Reform Act of 1986, that would stimulate sufficient demand for real estate to absorb the excess housing inventory that contninues to erode property values. 

Comments (4)

Charlie Ragonesi - Big Canoe, GA
Homes - Big Canoe, Jasper, North Georgia Pros

This is a really good post. B of A cannot do anything right from managing risk in this market to dealing with short sales. I am not sure your return to a different tax code is the answer . But it may be one of them

Aug 13, 2009 12:33 AM
Mark MacKenzie
Phoenix, AZ

Charlie:  Thanks for the comment.  We need more demand.  Loan modifications are not a long-term fix.  While lower rates and an $8,000 first time home buyer tax credit have helped to stabilize demand, they have done little to keep pace with surging foreclosure activity.  The supply of homes continues to outpace the demand for them.  This means home values go lower...which means more foreclosures.

Aug 13, 2009 12:37 AM
Eric Murrietta
Homeowners Financial Group USA, LLC - Scottsdale, AZ

I agree with the assessment that the foreclosures are going to continue to drive down the market.  More importantly is the fact that the loan modification government program has only proved to help 400K of the 2.7 million that are eligilble.  That is staggering.  I understand that is a lot of people that need loan modifications but what's the point of the program if even those who are eligible aren't using it.  They will eventually become impatient and...maybe walk away.  It's sad these large banks won't do more to implement the program. 

Aug 13, 2009 06:18 AM
Sharon Alters
Coldwell Banker Vanguard Realty - 904-673-2308 - Fleming Island, FL
Realtor - Homes for Sale Fleming Island FL

Mark, I had read about Deutsche Bank's prediction. It's hard to understand why BofA and Wells don't want to work with the loan modifications.


Aug 14, 2009 10:25 AM