NEW YORK (Dow Jones)—Delays stalling the foreclosure process are prolonging the U.S. housing downturn, RealtyTrac said Thursday, as it reported a surprising jump in foreclosure filings.
Slightly more than 290,000 properties - one in every 440 housing units – were slapped with a foreclosure filing in February, up nearly 30% from a year earlier. That total, a roughly 6% increase from January, was the third-highest monthly total - following those in August and December 2008 - since the foreclosure-listing service's report was launched in early 2005.
The results, which come amid widespread foreclosure-prevention efforts, show filings spike after moratoriums expire. After a 45-day voluntary moratorium in Florida ended at the end of January, foreclosure activity increased 14% from a month earlier, RealtyTrac said. Many New York proceedings delayed by a 90-day extension appear to have hit the system in February, boosting foreclosure activity by 23%, the report said.
"We're not making progress," said Rick Sharga, a senior vice president with Irvine, Calif.-based RealtyTrac. "We have seen artificial forces that have been basically muddying the waters."
That could mean further increased foreclosure activity throughout 2009. More moratoriums are ending: J.P. Morgan Chase & Co.'s (JPM) ban on new filings is set to end Friday. Bank of America Corp. (BAC) says it is extending its program on a week-by-week basis as it assesses the potential eligibility of borrowers under the government's recently announced program addressing the housing crisis.
Meanwhile, thousands of Alt-A and option-arm loans worth $60 billion to $70 billion are due to reset starting in the second quarter, Sharga said. This wave of resets comes as unemployment continues to mount.
The underlying economy is significantly weaker than it appears. Government efforts to massage failing markets simply creates extended oversupply and delayed reporting of current problems. What it really does is distort the free market and obscure investor’s ability to accurately assess risk. It’s one of the many reasons money is flooding out of so many asset classes – risk goes up and prices go down as information becomes suspect.