A new wave of foreclosures is expected to hit the Washington area as prime borrowers stumble financially under the weight of the economic downturn.
Although foreclosure activity nationwide fell last month by 8 percent, November marked the ninth straight month in which more than 300,000 properties received foreclosure filings, according to RealtyTrac, which follows mortgage failures nationwide. Analysts have warned that as many as 4 million more foreclosures will hit the market nationwide over the next few years.
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“I don’t know why, but banks have been sitting on homes even when the owners have stopped making payments or when they already have foreclosed,” said a Long & Foster Realtor Debbie Cook. “There is one house in downtown Silver Spring that has been empty for two years. The bank hasn’t put it on the market and it hasn’t hired an agent. What I see is, once the banks catch up, we’ll be hit with a lot more foreclosures and short sales in 2010 and 2011.”
This has raised concern about a “shadow” market for foreclosures as banks delay acting to take back homes either due to local regulations, efforts to work out new financing for owners or hopes that real estate market will improve.
The Washington-based Urban Institute warned in an October report that many more prime borrowers were now in trouble because of job losses and other pressures from the recession.
“Prime loans are responsible for an increasing share in the foreclosure inventory,” the group reported. “At the beginning of 2007, prime loans accounted for 11 percent of the serious delinquencies; by June 2009, the figure had climbed to 31 percent.”
As of June, the group found, about 104,200 local mortgage loans were delinquent but not yet in foreclosure — comprising more than 8 percent of all loans in the Washington metropolitan area.
“Almost half of these households were seriously delinquent — that is, more than three months behind on their payments — and very likely will end up in foreclosure,” the report said.
