Foreclosure

Lenders repossessed 1,050,500 homes last year, according to the 2010 end-of-year foreclosure report from RealtyTrac. The annual figure marks a record-high number of new bank-owned properties tracked by the company. The 2010 tally is up 14 percent from the previous year, when banks seized 918,376 homes. While the number of homes taken back by lenders jumped by more than 130,000 from 2009 to 2010, RealtyTrac's data show the number of default filings declined by 20 percent over the same period.

As the backlog of foreclosures continues to drive down housing prices, losses on private-label residential mortgage backed securities (RMBS) will increase in 2011, according to Moody's. The forecast for more red ink seeping from home loans sold to investors comes despite the fact that the agency believes the rate at which loans become delinquent will decline during the year. Moody's expects flaws in foreclosure practices that have recently come to light to delay foreclosures by three to six months, further extending the window of losses for investors.

Reports have surfaced that the FDIC is contemplating stricter requirements that would force banks to disclose what potential ramifications a loan modification on a first lien they service would have on an underlying lien. Industry analysts have speculated that servicers may be reluctant to modify a primary loan because the bank that services the loan also holds the second lien. Such an arrangement could be considered a conflict of interest and prompts some to wonder if investors would be swayed if they knew of the arrangement beforehand.

In November after the robo-signing scandal broke, New York City Comptroller John C. Liu, on behalf of the New York City Pension Funds, called on the directors at Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo - which together service more than half of the nation's mortgages - to conduct an independent audit of their foreclosure practices. This week, Liu issued a demand for the banks to immediately follow through on that request, this time backed by 11 major public pension funds from several states.

The Friday ruling by the Massachusetts Supreme Court that invalidated two foreclosures by U.S. Bank and Wells Fargo has prompted an outpouring of responses from the industry, and many are wondering if the ruling will have far reaching effects on other foreclosure sales. The Supreme Court ruled the banks did not have the legal right to foreclose on homes in the state because they did not have proper documentation to prove they owned the mortgages at the time of foreclosure.

When Philadelphia Sheriff John Green resigned on Friday, his replacement instituted some major changes immediately. Acting Sheriff Barbara Deeley announced a move to dismiss several top members of the staff and hired a new chief deputy. Deeley also announced that a 50-day moratorium on sheriff's sales of foreclosed homes would be instituted, and she terminated agreements with all title companies currently doing business with the sheriff's office.

Sen. Bob Casey says money that has been earmarked to help homeowners who've lost their jobs stave off foreclosure is overdue in being distributed. Casey has sent a letter to HUD Secretary Shaun Donovan, urging him to release $1 billion in funds Congress authorized last year for HUD to implement the Emergency Homeowners Loan Program for the unemployed. Casey says the promised funds still have not reached those families who are struggling to make their mortgage payments.

The Michigan State Housing Development Authority (MSHDA) has provided free foreclosure counseling assistance to more than 17,000 families through the National Foreclosure Mitigation Counseling (NFMC) program over the last two years. Created by Congress in January 2008 to address the nationwide foreclosure crisis by increasing the availability of free counseling for families at risk, the NFMC program has provided 1.12 million struggling homeowners with foreclosure prevention counseling across the nation.

The Massachusetts Supreme Court ruled Friday that U.S. Bank and Wells Fargo did not have the legal right to foreclose on two homes in the state, invalidating the lenders' seizure of the properties and raising further questions about foreclosure documentation - this time related to the proper transfer of ownership on mortgages packaged as securities. Analysts warn that the decision could have far-reaching implications on loans that have already been liquidated, those in the process of foreclosure, and sales of bank-owned homes.

State-chartered banks and credit unions in Maine saw an overall decrease in home foreclosure activity during the third quarter of 2010, according to data released this week by the state's Bureau of Financial Institutions. Both new delinquencies and foreclosure starts dropped, which could mean future foreclosures are also on the wane. However, seriously delinquent first mortgages increased during the same period.