The headlines this morning (including our own) seems to suggest a light at the end of the foreclosure tunnel. "U.S. Foreclosure Filings Increase at Slowest Pace in Four Years," proclaims Bloomberg. Any reasonable reader would be justified in coming to the conclusion from the headline -- which, I'm afraid, is where many readers stop -- that the article which follows will be chock full of good news. Well, when it comes to real estate news, you really do have to keep on reading!While it is true that the RealtyTrac report shows that foreclosure filings in February rose at the slowest rate since 2006, that has nothing to do with a brightening economic picture.
Rather, as RealtyTrac's CEO, James Saccacio, said in a statement, "This leveling of the foreclosure trend is not necessarily evidence that fewer homeowners are in distress and at risk for foreclosure, but rather that foreclosure prevention programs, legislation and other processing delays are, in effect, capping monthly foreclosure activity."
And, what exactly does this mean?
Well, for example, lots of folks have managed to get the mandatory three month trial mortgage modification that is supposed to be a prelude to a more permanent fix. And, while that clock is ticking, of course, there is no foreclosure! Hence, the apparent slowing down of the foreclosure filing rate.
Unfortunately, as the Bloomberg piece does point out, only about 116,000 mortgages have actually gone on to be permanently modified, not the millions the Obama administration said it had hoped to help with the program. (Bendix Anderson of HousingWatch notes the more optimistic number of nearly 200,000 homeowners that have been approved for permanent loan modifications as of the end of January).
Still, many, many of these homeowners now in the trial modification period are likely to eventually file for foreclosure down the road when their request for a permanent modification is rejected. That was pointed out by HousingWatch's Alyssa Katz recently.
Rick Sharga, a RealtyTrac official, tells Bloomberg that he "expects record bank seizures this year."
The Reuters headline is no less misleading: "U.S. foreclosures drop 2nd straight month in Feb...." True. But five graphs down, we get to this: "Proclaiming an end to rampant foreclosures, however, is premature." Really? No kidding! It even goes on to inform us that another possible reason (other than any sort of actual economic recovery) for a drop in foreclosure filings might be the fact that, "severe winter weather appears to have temporarily slowed the processing of foreclosure records in some Northeastern and Mid-Atlantic states," to quote RealtyTrac.
And, by the way, the latest figures still show four states staggering under the heavy load of foreclosure: Nevada leads, with Arizona and Florida tied for second, and the great and very broke state of California coming in fourth, with one in every 195 households filing for foreclosure.
Charles Feldman is a journalist, media consultant and the co-author of the book, "No Time to Think: The Menace of Media Speed and the 24-hour News Cycle." He has written about real estate related issues for several years.
