Unemployment fuels spike in February foreclosures

Foreclosure prevention efforts and moratoriums by banks and government institutions failed to stem the nation's foreclosure problem in February. Foreclosure filings were reported on 290,631 properties during the month, a 30% increase from February 2008, and a 6% increase from January, according to foreclosure listings firm RealtyTrac.

It was the third-highest monthly total since RealtyTrac began tracking foreclosures at the beginning of 2005, trailing the sharp spikes in delinquencies in August and December of last year. (RealtyTrac is a partner of MSN Real Estate.) The RealtyTrac report echoed news last week by the Mortgage Bankers Association that a record 11% of all mortgages were either behind in payments or in foreclosure in the fourth quarter of last year — the highest number since it began tracking foreclosure data in 1972, and the largest quarter-over-quarter surge in mortgage delinquencies.

These days, rising unemployment — not just problem loans — is driving the surge, says Rick Sharga, RealtyTrac senior vice president, as delinquency rates outpace the overall rate of foreclosure activity. "This month's report is the first time we've seen specific evidence of this," Sharga says, noting that economically hard-hit Oregon, Illinois and Idaho moved into the top 10 – a first for Illinois and Idaho. "All three (increases in foreclosure activity) appear to be due to unemployment-related activity."
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Unemployment was similarly singled out as a leading foreclosure factor by Jay Brinkmann, the MBA's chief economist, in a statement last week. "The delinquency rates continue to climb across the board for prime fixed-rate and subprime fixed-rate loans, loans whose performance is driven by the loss of jobs or income rather than changes in payments," he said.

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In January, jobless rates rose in 49 states and the District of Columbia compared with the prior month, and all had increases over the previous year, according to the U.S. Labor Department. Hardest hit were states in the West and Midwest where manufacturing, construction and retail employment has cratered.
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Nevada, Arizona, California still lead in foreclosures
Nevada posted the highest foreclosure rate in the U.S., with one in every 70 homes receiving a filing. It was followed by Arizona, with one in every 147, and California, with one in every 165.

Nevada's total filings — from notice of default to bank auction — on 15,783 homes represent a 158% increase from February 2008 and a 9% spike from the previous month.

Arizona's notices on 18,119 properties represent an 88% increase from last year and a 23% increase from the previous month.

California's filings on 80,775 properties register as a 51% increase from last year and a 5% increase from January.

An ugly March?
With many foreclosure stays ending this month and unemployment on the rise, Sharga expects to see a significant spike in foreclosures for March. Foreclosure relief outlined recently by President Barack Obama probably won't begin to affect this rate for months, analysts say.

And even then, Sharga says, it's hard to tell how many homeowners would qualify for the relief, given included limits on how much homeowners can be "underwater" on their home and the uncertainty surrounding securitized loans.

All of this has Sharga expecting that the peak of this foreclosure crisis won't happen until the second or third quarter. "It's difficult to tell when the bottom is going to be," Sharga says. "But I think we can see it from here."