Yes, there are fewer foreclosures on the market now … There are several reasons for the decline in the number foreclosure sales, but such is not the case in terms of actual filings. Filings may be about to increase significantly though.
The reasons for the cancelled sales, abated foreclosures and dismissals have to do with:
1. Moratorium commitments for entities receiving government funds
2. Some servicers have run out of money to advance foreclosure costs
3. Servicers are now being instructed to mitigate costs when a foreclosure will only result in the burden of maintenance, repair, taxes and insurance and the ire of the affected neighborhood
4. The overwhelmed servicers have minimal trained staff and huge caseloads
5. The servicers have to deal with conflicts between investor tranches
6. Servicers have to wade through the complex IRS REMIC tax shelter issues set up in the PSA
The decline in foreclosure sales is a result of loss mitigation which has now morphed into “loan management”, but is not likely to be successful in the near term as property value continue to decline, making it difficult to accomodate modifications.
In spite of these efforts, many borrowers will not qualify because of bad debt to income ratios, loan to value ratios. Also due to poor credit scores and in general, an inability to qualify for a mortgage loan and/or obtain property insurance.
In 2008, more than half of the borrowers who were able to obtain loan modifications from their lenders were delinquent again six months later. In other words, nationwide modification efforts have not been especially successful thus far.
Then we have the next generation of defaults – That is, those occurring within the ranks of the chronically unemployed – previously referred to as the middle class. Nationwide surveys indicate that the average family has the liquid resources to survive for 60 days without income. Unemployment rates are rising, and consequently, a rise in related mortgage defaults.
All this data is being closely scrutinized by lenders and government alike. The lenders are coming around to the realization that putting families out of their homes is not a good business model.
If you are looking for a deal on a distressed property, short sales may be better options than bank owned.