Foreclosure Deal May Mean More Foreclosures This Year
That big, $25 billion mortgage settlement that we've been hearing about forever is finally done. The deal involves five big banks and grew out of the robo-signing scandal, where bank employees signed off on thousands of foreclosure documents without reading them.
The biggest chunk of the settlement will go toward reducing what underwater borrowers owe on their mortgages. (To be underwater on your mortgage is to owe more than your home is worth).
The settlement will help an estimated 1 million homeowners. But 11 million homeowners are underwater. And while many of those people will continue to pay their mortgage, others are likely to go into foreclosure.
In fact, the foreclosure process slowed significantly last year, as negotiations over the settlement dragged on and banks waited for the details to become clear. Now that there's a settlement in place, the rate of foreclosures is likely to pick up.
Last year, banks repossessed just over 800,000 homes, according to RealtyTrac, a company that tracks this sort of thing. This year, that number is likely to be over 1 million, Daren Blomquist, a VP at RealtyTrac, told me this morning.
Another million homes are likely to be repossessed 2013, he said. In a normal year, by comparison, the figure would be below 500,000.
Repossessions are not only painful for the people who go through them; they tend to have a broader impact on the housing market, because foreclosed homes tend to sell at a discount.
In other words, it could still be years before the housing market gets back to something resembling normal.
For More:"The Mortgage Deal: A Reality Check"