With most banks in “full-delay” mode in connection with foreclosures during 2011, California homeowners can expect a change—for the worst—in 2012 as banks look to aggressively pursue seriously delinquent mortgages this year. The foreclosure rate is expected to rise significantly, based on the second-half surge of initial default notices sent in 2011, but the rate should remain below the peak of 2010. Nonetheless, continuing foreclosures remains disconcerting.
The Federal Reserve is working to stabilize the housing market. The Fed has urged Congress to help underwater borrowers by reducing their loan principal and has requested that Fannie Mae and Freddie Mac rid themselves of the backlogged foreclosures in bulk sales. Whether Congress and the Government Sponsored Entities will respond to the Fed’s requests, remains to be seen.
Of course, with increased foreclosures comes decreasing property values. According to the Los Angeles Times: “California and other states are likely to see an enormous wave of long-delayed foreclosure action in the coming year as banks deal more aggressively with 3.5 million seriously delinquent mortgages. And experts said that dealing with the foreclosure process, from issuing notices of default to selling repossessed homes, is likely to push housing prices lower this year before the real estate market has a chance to recover.”
Politicians have shown an astonishing willingness to provide corporate welfare to commercial banks, auto companies, and Wall Street banks, in the form of taxpayer bailouts and enormous backdoor loans from the Fed. The question remains whether any relief will be provided to the millions of homeowners that are underwater on their homes and in serious delinquency.