In Virginia, the sub-prime mortgage crisis may be dwindling, but weakening macro economic factors continue to limit the economic recovery by triggering additional foreclosures. These economic factors, continued employment decline, higher expenses and limited income growth, are now contributing to difficulties for conventional mortgage holders. Consequently, the modest 18-month improvement in early-stage delinquencies has ended. These trends have produced a slight increase in foreclosures in 2011. This trend is similar in other states.
The 2011 foreclosure increase has been caused by several factors. To begin with, the 2010 moratoria on foreclosures associated with the “robo-signing” controversy caused a backlog of loans in the foreclosure process. The average number of months to process a foreclosure continues to rise, and in some cases, the process has stalled.
On the back end of the process, the number of lender-owned homes is stagnant. The number is not increasing because of a slight improvement in investor sales. Unfortunately, the number of qualified, non-investment purchasers is decreasing as foreclosures increase, since an individual who has been through a foreclosure generally cannot purchase another home for two years.
The increase in foreclosures continues to suppress the existing home sales and prices in Virginia, especially in the northern Virginia area. In addition to the foreclosures, which are creating a higher inventory of lender-owned homes, other trends that may keep the prices down are lower loan limits and lender’s strict underwriting standards. The foreclosures in Virginia and across the country continue to create difficulties in overall economic stability.
Measures must be taken to ensure that Virginians can stay in their homes with reasonable mortgages and reliable income. These changes will help bring about that elusive economic recovery that Wall Street can’t seem to find.
Special thanks to Barry Anderson at VHDA who provided the source materials for this post.