U.S. posts smallest foreclosure increase in past four years

WASHINGTON — The foreclosure crisis isn’t over, but the pace of growth may finally be slowing down.

WASHINGTON — The foreclosure crisis isn’t over, but the pace of growth may finally be slowing down.

RealtyTrac Inc. said Thursday that the number of U.S. households facing foreclosure in February grew six per cent from a year ago, the smallest annual increase in four years.

On the state level, foreclosures declined on a monthly and yearly basis in the hard-hit states of Nevada, Arizona and California, but still grew rapidly in Florida.

More than 308,000 households, or one in every 418 homes, received a foreclosure-related notice, the Irvine, Calif.-based foreclosure listings company reported. That was down more than two per cent from January

Still, fears remain about the hundreds of thousands of homeowners who are still being evaluated for help under loan modification programs.

Many analysts say most of those borrowers will eventually lose their homes, sparking a new round of foreclosures later this year.

“It’s premature to declare victory just yet,” said Rick Sharga, a RealtyTrac senior vice-president. He did, however, allow that, “If this is the beginning of a slowdown in growth rates, that would be a good thing.”

Banks repossessed nearly 79,000 homes last month, down 10 per cent from January but still up six per cent from February 2009.

The RealtyTrac report follows an encouraging report last month from the Mortgage Bankers Association. It said the percentage of borrowers who had missed just one payment on their home loans fell to 3.6 per cent in the October to December quarter, down from 3.8 per cent in the third quarter.

While that was a surprising piece of positive news, foreclosures were still at record high levels.

The number of borrowers who have either missed a payment or are in foreclosure was at 15 per cent.

A record 2.8 million households were threatened with foreclosure last year, RealtyTrac said, and the number is expected to rise to more than three million homes this year.

The foreclosure crisis forced the federal government and several states to come up with plans to prolong the process so delinquent borrowers can try to find help.

But those efforts have barely dented the problem. Case in point: The Obama administration’s US$75-billion foreclosure prevention program has helped only 116,300 homeowners in the past year.

After a year of trying to enrol homeowners in the Obama administration’s program, housing counsellors are feeling deflated.

At many of the 100 mortgage companies charged with running the program, employees still “don’t really know what the guidelines are — or refuse to adhere” to them, said Cheryl Cassell, manager of housing counselling at the National Community Reinvestment Coalition, a community group in Washington.

Foreclosed homes are typically sold at steep discounts, lowering the value of surrounding properties.

Cities lose property tax dollars from homes that sit empty and lower property values.

Economic woes, such as unemployment or reduced income, are expected to be the main catalysts for foreclosures this year.