Homebuyers Tax Credit Causes Jump In Foreclosures

By Curt Nickisch (@CurtNickisch)
Apr 22, 2010, 12:12 PM
4 Comments

BOSTON — Foreclosures came back with a vengeance in the month of March. New figures from The Warren Group show the number of homes taken back by lenders surged to 1,300 — more than 50 percent higher than the month before.

The last time that many homes closed in a month, it was 2008, the height of the first foreclosure crisis in Massachusetts.

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More than 2,500 lenders also filed petitions to initiate new foreclosure processes — up over 20 percent from February.

“Lenders are not afraid to foreclose, and they’re doing so with gusto,” said Vincent Valvo, of the real estate tracking firm The Warren Group.

Valvo says the main reason for the surging figures is the federal tax credit for home buyers. Banks are more willing to foreclose because other buyers are willing to snap up the properties.

“I’m not really sure that the government wanted that to happen,” Valvo said.

Although the number of people losing their homes makes for grim news, Valvo says it’s positive that their properties are going back into private hands that can pay for them.

“It’s better for all of us that these properties move into private hands then they stay in the hands of lenders, mortgage companies, banks, or government agencies, weighing down the market for a long time to come,” Valvo said.

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jeff

This is one messed up country.
What is wrong with this picture?
ray

Thank your buddy Barney who said everyone should own a home even if you do not have the means to pay for the mortgage.
jemimah

I can answer that, Jeff: greed and naivete. Most Americans have come to believe that we can anything and everything we want, the minute we want it. American business thrives on that immature philosophy. In Europe, people save more, contribute more to their retirement and to taxes, have more rules and safeguards from the government concerning commerce and social welfare. The everyday guy on the street has health care and child care, doesn’t run up $40,000 in credit card debt, is more concerned with the environment, actually listens to real news! They’ve been around a lot longer than we have and they’ve learned that they can’t act like spoiled children grabbing at whatever catches their eye at any give3n moment. Most Americans are just the opposite: greedy, opportunistic, only caring about themselves, incredibly uninformed and uninterested in politics both locally, nationaly and abroad. And those are just naming a few of the most obvious problems. That’s what’s wrong with this picture.
Ed

Well, I’m not sure about the conclusion of this one… how do we know these homes are being resold after foreclosure to people who can actually afford them? The underwriting on loans is still shoddy (mostly because fannie and freddie are now THE defacto lenders; no banks will issue non-conforming mortgages).

Since the housing tax credit spurring sales, it is artificially inflating home prices and homes are staying above their true value. In that case, if the property values continue going down after the tax credit expires, then these new borrowers now will most likely be underwater and default just like the original owners.

The problem is lack of underwriting reform and downpayments/skin-in-the-game (do you know ANYONE putting down 20%+ on a mortage? 20% of the median in boston is $60K. Who has 60k lying around? newlyweds? unlikely. more like 60k in debt from a frivolous wedding their family guilted them into.) Also, interest rates are going to rise; this will have the unintended positive effect of lowering home prices, encouraging saving rather than borrowing to pay for a home.