Foreclosure

The August Mortgage Monitor report released Friday by Lender Processing Services shows that foreclosure starts are continuing to accelerate, with the GSEs displaying more aggressive timelines on early stage delinquencies. Last month, the company tracked 282,528 newly initiated foreclosures. That's 20 percent above a year ago and the highest level recorded by LPS since January of this year, when there were 287,865. As of August month end, there had been more than 2 million foreclosure starts so far this year.

Banks that sold bad mortgages to Fannie Mae and Freddie Mac have a contractual obligation to buy the loans back, according to their regulator. But many of the nation's largest institutions aren't living up to their end of that commitment. The director of the Federal Housing Finance Agency says that as of the end of the second quarter, Fannie Mae had $4.7 billion in outstanding repurchase requests, and Freddie Mac had $6.4 billion -- more than a third of which have been outstanding for more than 90 days.

According to the national nonprofit Homeownership Preservation Foundation (HPF), economists estimate that close to 4 million homeowners will face delinquency in the near future. In an effort to help thwart this assessment, HPF works to provide information and financial education to guide consumers toward sustainable homeownership. The foundation reports that its Homeowner's HOPE Hotline has aided more than 4 million distressed homeowners since the financial crisis began in 2008.

According to the Warren Group, a Boston-based provider of real estate data in New England, foreclosure petitions in Massachusetts reached its highest number in more than a year, jumping to 2,713 in August-a 13.23 percent increase from a year ago, according to the Boston-based research firm the Warren Group. More than 1,200 foreclosure deeds were recorded in August, an increase for the eighth straight month.

The analysts at Moody's are downbeat in their outlook for both the U.S. economy and the housing market. They warn that the there's a stronger chance the country will slide back into a recession, and they are forecasting a longer and deeper housing correction. Because of weak housing demand, soft job creation, and the slow speed at which the industry is working through distressed mortgages, Moody's says recovery is already back-sliding into a double-dip. The agency expects house prices to fall until the third quarter of next year.

It was reported by Bloomberg Monday that Ally Financial's GMAC Mortgage had ordered its brokers and agents to halt foreclosures and REO sales on homeowners in 23 states. The company has denied the rumored foreclosure moratorium, calling it ""untrue speculation."" GMAC says an internal procedural error may cause some delays for foreclosures already in process, but all new foreclosure actions are ""continuing in the ordinary course of business with no interruption.""

That dreaded shadow inventory of homes that has captured headlines and gripped the industry and market analysts with angst is beginning to make its way out of the darkness, according to John Burns Real Estate Consulting. The firm says loan modifications were successful in delaying the inevitable foreclosure. But homes that have been stuck in that neverland of somewhere between delinquency and repossession are now winding their way through the foreclosure pipeline at a quicker pace and will soon come out the other end as a short sale or REO.

Ohio Attorney General Richard Cordray's lawsuit against Barclays Capital Real Estate, dba HomEq Servicing, just took a legal step forward with a recent decision by a state court. This week, a Montgomery County judge overruled the defendant's motion to dismiss, clearing the way for Cordray's case to move forward, and the attorney general says, setting the stage for servicers to be held legally responsible for their actions in the aftermath of the foreclosure crisis.

Distressed homeowners looking for a way out of their mortgage that doesn't involve foreclosure may find relief is on the way from a new bill introduced in the U.S. House. Lenders have taken a lot of heat for elongated short sale timelines, with stories coming in from the field that potential buyers have walked away because they can't get an approval on a short sale price. The legislation would impose a deadline on lenders to respond to short sale requests, requiring them to return an answer within 45 days.

With housing woes capturing front-page headlines in the United States, the odds of distraught homeowners becoming even more frustrated and opting to abandon their mortgage obligations has become a growing concern within the industry. A survey by the Pew Research Center found that more than a third - 36 percent - of Americans believe the practice of ""walking away"" from their mortgage payments and their home is acceptable, at least under certain circumstances.