Region’s foreclosure surge may be its last
Published 08:58 p.m., Wednesday, March 14, 2012 in CT Post
December foreclosure activity in the Stamford-Bridgeport metro region spiked to its second highest level in three years, signaling what some see as the final step in resolving the ills of housing bubble of the last decade.
CoreLogic, the California-based data warehouse for real estate filings, said this week the foreclosure rate for lower Fairfield County rose to 4.57 percent. Only October’s rate of 4.59 percent has been higher in three years. Both figures are higher than those of the state and nation.
“The foreclosure rate spike is beginning to reflect the ability of the holders of the debt to get beyond the robo-signer issue,” Edward Deak, a Fairfield University professor of economics said Wednesday. “Nationally it’s going to be a rising trend. I think it will go through the summer and be the last gasp of the problem.”
Deak said the banks put on hold many of their foreclosures as they faced allegations and investigations into their foreclosure practices, including having so-called robo-signers, or employees known for the speed with which they rubber-stamped mortgage documents without checking their accuracy.
This month, attorneys general for 49 states reported a $25 billion settlement of allegations of improper foreclosure and mortgage servicing procedures with four of the largest banks in the country, including Bank of America, Wells Fargo and JP Morgan Chase, who are major players in the Connecticut market.
The banks, while obligated to offer some restitution and modifications, are also now moving to clear up bad debt that was generated from a housing market that was oversold, Deak said.
He said homeownership rates in the U.S. rose to near 70 percent during the peak of the boom, but that was fueled by teaser rates and inflated prices that combined left many new entrants to the market living in homes they could not afford.
The larger impact, he said, from this increased activity, could be to drive up apartment rents even further as more people move out. He also said it will continue to hold down residential real estate prices amid increased inventory.
But overall, he said there’s a good chance that the economy will be able to finally get moving this year, provided it can whether other shocks, like bad news out of Iran and Europe and the troubles that come with a presidential election.
Mark Sank, a Stamford attorney specializing in defending debtors in foreclosure cases, said he’s seen a pickup in activity, but the good news is that the banks are showing a willingness to work with borrowers.
“At about the same pace that new clients are coming in the door, I’m managing to get modifications offered to my existing clients,” he said. “The banks are starting to finally loosen up and make common-sense decisions.”
Like Deak, he said, the increase is due to the hiatus banks took in the wake of the scandal over their foreclosure practices and it should slow down, though he didn’t give a specific target date.
The primary reasons for foreclosure actions, however, are based on economics.
“For most people, it had to do with the loss of employment,” he said. “But there are some who suffered illness or had loans that adjusted and they couldn’t afford them.”
Sank sees foreclosure activity up throughout the region, even in Danbury, which is not covered by the CoreLogic report.
Anthony Derbyshire, a Realtor with Coldwell Banker Residential Brokerage in Fairfield, also sees a temporary rise in foreclosure and related activity, like short sales in a market that has stabilized. But he still said the market is moving forward, with people buying and selling like they always have.
“In the end, there’s somebody looking for their first home… somebody who is walking through the house where they raised their kids and saying, `What am I still doing here?’ ” he said. “There’s more reality in the market.”