Foreclosure Filings in U.S. Jumped 30% in February (Update2)

By Dan Levy March 12 (Bloomberg) -- Foreclosure filings in the U.S. climbed 30 percent in February from a year earlier as the worsening economy thwarted efforts by the government and lenders to prevent homeowners from losing property, RealtyTrac Inc. said. A total of 290,631 homes received a default or auction notice or were seized by the lender, the Irvine, California-based seller of default data said in a statement today. Properties that got a foreclosure filing for the first time totaled 161,976, the highest in RealtyTrac records dating to January 2005. “More people have lost their incomes or are underwater on their mortgages, so a new housing plan won’t change those facts by itself,” Barry Eichengreen, professor of economics at the University of California, Berkeley, said in an interview. The U.S. housing crisis is deepening as President Barack Obama attempts a $275 billion rescue to help borrowers with sinking home values or unaffordable loans. Declining prices sapped $2.4 trillion in value from the nation’s residential market last year, according to First American CoreLogic. A measure of prices in 20 U.S. cities has fallen every month since January 2007, the S&P/Case Shiller index shows. Rising unemployment also is making it harder for homeowners to keep up with payments. The U.S. jobless rate rose to 8.1 percent in February, the highest in more than 25 years, according to the Labor Department. Wait and See Some of the top U.S. lenders own as many as 700,000 foreclosed homes they have yet to offer for sale, said Rick Sharga, executive vice president for marketing for RealtyTrac. The banks may be waiting to see how U.S. government plans develop before selling the properties, Sharga said. The lenders and government-owned Fannie Mae and Freddie Mac, the two biggest U.S. mortgage financing companies, have already extended temporary foreclosure moratoriums. The combined percentage of loans in foreclosure or at least one payment past due in the fourth quarter was 11.18 percent, the highest on record, according to the Mortgage Bankers Association in Washington. The percentage of loans 60 days past due and 90 days or more late also were at record levels. “Many elements are lined up to suggest we’ll have more foreclosure activity in the future, maybe an all-time high,” Sharga said. Obama introduced a plan Feb. 18 to use $75 billion of public funds to entice lenders to modify or refinance home loans, stem foreclosures and rescue delinquent homeowners. The president also said the Treasury Department would provide as much as $200 billion in additional backing for Fannie Mae and Freddie Mac to free up funding for new mortgages. ‘Financial Hardship’ To qualify for a refinanced loan, applicants will have to fully document income with pay stubs and tax returns, and sign an affidavit attesting to “financial hardship,” according to Treasury. One in 440 U.S. housing units received a foreclosure filing last month, and Nevada, Arizona and California had the highest foreclosure rates, RealtyTrac said. The February total was the third-highest on record. Filings rose 6 percent from January. Idaho, Illinois and Oregon joined the list of top 10 states with the highest rates, a sign that rising unemployment is now pushing defaults, Sharga said. Florida, Michigan, Georgia and Ohio were also in the top 10. California had the highest total with 80,775 foreclosure filings in February, a 51 increase from a year earlier. Auction sale notices almost tripled to 18,831. Florida Rankings Florida had the second-most filings at 46,391, a 43 percent increase from a year earlier. Auction sale notices climbed 158 percent and bank seizures rose 128 percent. Arizona ranked third in filings with 18,119, up 88 percent from February 2008. New York had the 35th highest rate and 4,301 filings. New Jersey ranked 29th and had 3,279 filings. Connecticut was 14th with 2,220 filings, RealtyTrac said. Las Vegas had the highest foreclosure rate among metropolitan areas with populations of 200,000 or more. One in 60 housing units there received a filing, more than seven times the national average. Cape Coral-Fort Myers, Florida had the second-highest rate: one in every 65 housing units, according to RealtyTrac. Five California cities ranked third through seventh: Stockton, Modesto, Merced, Riverside-San Bernardino and Bakersfield. Underwater Owners Reno-Sparks, Nevada was eighth; Phoenix was ninth; and Vallejo-Fairfield, California ranked tenth, RealtyTrac said. The company collects data from more than 2,200 counties that are home to more than 90 percent of the U.S. population. More than 8.3 million U.S. borrowers owed more than their loans were worth in the fourth quarter of 2008, and an additional 2.2 million will be underwater if home prices decline another 5 percent, according to First American CoreLogic. An average of 230,000 borrowers a month slid to negative equity in the quarter, led by California with 43,000, Texas with 16,000 and Nevada with 15,000, the Santa Ana, California-based seller of mortgage data said March 4. To contact the reporter on this story: Dan Levy in San Francisco at dlevy13@bloomberg.net