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Foreclosure Filings Dropping Could Have Several Meanings



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By : Karim El Sheikh    99 or more times read
Foreclosure filings have dropped nationwide and while many see this as a good sign for the real estate market, a careful analysis of this figure shows it in another way.

The first thing that you must consider is that near the end of 2010 the mortgage industry was hit by the robo-signing scandal. Many of the major lenders admitted that their employees were bulk signing foreclosure papers without verification. These lenders put a moratorium on their foreclosures until this could be straightened out. This self imposed moratorium went into effect in October. This is the same time that the number of foreclosures dropped to under 300,000, a sign that the slow down in defaults may only be a result of this process.

The next fact that must be considered is that foreclosure rates dropped by 50 or more percent in some areas of the country, which skewed the final results of these figures. States like Florida, who have extremely high foreclosure rates, have dropped by over 50% while state attorneys are considering criminal charges against lenders who participated in robo-signing. Foreclosures in Massachusetts dropped by nearly 70% due to the recent state supreme court case that ruled in favor of the evicted home owner. Other states, such as Maryland, have also seen a considerable drop. However, when the robo-signing fiasco is resolved these companies will begin to pursue their claims again.

The final fact that should be addressed is that the January figures, while down compared to the previous year, were up from December. While the increase in foreclosure filings was only increased by 1% during this period the increase in itself should be some what alarming. Any rise in the foreclosure percentage is an outward sign that the economy is still not improving and that the real estate market is still on shaky ground.

This increase has happened at a time when banks and other lending institutions are refraining from collecting on defaulted loans. This should send off warning bells to everyone in the industry that either the banks have fixed their foreclosure problems, or there are more homes defaulting than anticipated.

The slow down in foreclosures is only a temporary one. Lenders will need to deal with their defaulted loans at some point; they cannot openly ignore bad debts forever. When these lenders are able to ensure that their foreclosure filings are prepared correctly you will begin to see a steady rise in properties being foreclosed upon again.

Real estate prices are affected by the amount of foreclosures that are available on the market. The more homes that are available on the market, the less an existing homeowner can charge for their home when placing it up for sale. With home prices beginning to show a slight improvement, a new wave of foreclosure could send the real estate market tumbling once again.

Many people in the real estate industry have predicted 2011 to be the year that real estate begins to climb out of the recession. Most predict that the summer months will show improvements in housing process and that new home start ups will begin to increase at this time. However, if the lenders begin to foreclose on properties again that have been in limbo for the last several months, home prices may not begin their recovery.
Foreclosure.com is the top online resource for all real estate investment needs. Find foreclosures, preforeclosures, sheriff sales, short sales, and rent to own homes.

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