New Year, Old Reality: Foreclosures Still on the Rise

Real estate experts speculate the housing market will finally hit bottom this year. Unfortunately, this may be a contributing factor in the rise in foreclosures many are predicting will also occur this year. Other reasons for the foreclosure increase may include the robo-signing scandal that paused foreclosures last year and the poor economy and job market that continue to lag. For those homeowners experiencing financial hardship, there are options to prevent or stop foreclosure.

Recent Trends

According to Amherst Securities, there are 9.5 million homes in the U.S. that could potentially default. The leading broker dealer group anticipates the foreclosure rise to gain momentum during April, while current reports have already indicated a 28 percent jump in foreclosures in January. National foreclosures dropped slightly in February, but climbed in 21 states. According to RealtyTrac, in several cities there were significant foreclosure increases like 64 percent in Tampa, 53 percent in Miami and 43 percent in Chicago.

Contributing Factors

The struggling economy and job market continue to push people into financial difficulties. As a result, homeowners with ordinary mortgages, as opposed to subprime mortgages, are now defaulting on their payments. The robo-signing scandal of 2011 slowed new foreclosures, forcing banks to litigate the handling of those automatically signed and in-process. This issue has been settled, however, and banks are now moving forward with filing new foreclosures. As recently as February, five major banks settled with 49 states.

More Options

The main priority for most homeowners is to keep their homes, even after the foreclosure process has begun. While it may be possible to negotiate a short sale or new terms with a bank, this is often not an option. Filing either a Chapter 7 or Chapter 13 bankruptcy puts a temporary hold on a foreclosure. Under Chapter 7 debt protection, a mortgage cannot be discharged because it is considered a secured debt. Under Chapter 13, late mortgage payments are added to a payment plan and can be caught up.

Foreclosure Reality

2011 brought hope in the form of increased home sales, fewer price plunges and a smaller number of foreclosures initiated. However, in 2012, we have been hit with an old reality that foreclosures are on the rise. Some housing advocates say we are in the same spot we were in 2010, but that 2012 could be an even bigger foreclosure year. While this may seem like a backslide, many real estate experts say this may be a good and necessary step to go through to clear up a foreclosure backlog and move us forward toward a healthy economy and housing market.

If you are a homeowner who is facing foreclosure, contact a bankruptcy attorney in your area to discuss your circumstances and help you determine the best course of action. You may qualify for a Chapter 7 or Chapter 13 bankruptcy, which will put a hold on your foreclosure proceedings and allow you to regroup.