Banks repossessed $304 billion worth of homes in 2010, and they’re just getting started. Equifax, a national credit bureau, sees no end in sight to a housing recession that’s already dragged on for more than four years, according to the company’s latest housing study.
“Until these foreclosures are processed, the mortgage market will continue to impact economic growth,” Craig Crabtree, senior VP of Equifax Mortgage Services, said in a press release.
Repossessions just continue to rise. Banks repossessed mortgages worth $126.7 billion in 2006 and 2007 combined, Equifax reported. Soon after that, the amount skyrocketed and has remained at the same level since the first quarter of 2010.
Banks are foreclosing on so many homes that they cannot resell them all, leaving them stuck owning $21.8 billion worth of mortgages, Equifax found, equal to 3% of all first mortgages in the U.S.
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The latest report also confirms what many academic and government studies have found, that the average quality of mortgages dropped tremendously between 2005 and 2007. That’s when lenders ran out of qualified home buyers, but elected to continue reaping billions of dollars in transaction fees by lowering their lending standards. Almost two-thirds of past-due balances—houses teetering on the verge of going into foreclosure—involve loans written between 2005 and 2007.
As the crush of foreclosures and bank repossessions continues to grow, the Office of the Comptroller of the Currency released new guidelines last week requiring companies that service mortgages to improve how they handle delinquent and foreclosed homes.
The agency will require loan servicers to add staff and improve training. Servicers must end “dual-track procession,” in which they try to modify the loan and foreclose at the same time. They must do a better job of filing correct documents to courts, and notifying homeowners of legal actions.
Finally, the office said servicers must follow all existing laws and regulations about foreclosure. Many large servicers have admitted that they lacked the documents they needed to prove in court that they owned the loan in question. Some servicers responded by forging the necessary documents, which resulted in the robosigning scandal.
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