Sam Gendusa August 8, 2014

Newsletter - August 2014

To use a grisly analogy, the cadaver of America's strong economy pre-Recession has been well and fully autopsied by brilliant minds. We know (now) what went wrong – the "cause of death", if you will. To put it simply: reckless lending backfired. Old news, right? But now it's looking like there is a new addition to the "things we need to learn from the Recession" files: You can’t avoid the inevitable.

New numbers from a Black Knight Financial study reveal that foreclosure "starts" (aka foreclosures being initiated) increased 9.5% in May. This is news because they had been declining for 8 straight months. So, what happened? Let's break it down:

First step: note the year. It's 2014 – 5 years after a little year we like to call 2009, when a rash of loan modifications were implemented to attempt to help homeowners stay in homes they simply should not have been able to afford in the first place. (Not that the buyers are necessarily to be blamed for taking what seemed to be a good deal.)

Does that bump in foreclosure starts seem a little more sinister now? The 5-year fixed rate loan mods are now shifting to adjustable – and the rates are going up. And right on cue, the foreclosures are falling in line. Here are a few crucial data points regarding the foreclosure spike:

  • More than 50% of the foreclosures are actually "restarts". In other words, the loans had entered foreclosure at least once before – and been bailed out by a modification.
  • Nearly 80% of the foreclosure starts pre-date 2008.

So we're back where we began: you can't avoid the inevitable. Bad loans are bad loans and eventually that fact catches up with us. But what does this mean for you?

Well, it means you should take a quick inventory of your data acquisition and document retrieval systems and make sure you're able to handle the unavoidable uptick in foreclosures as we continue to fight our way back from the rubble of 2008. If you haven’t tried out Blue Streak Docs' document retrieval and title search services yet, why not give us a shot. We are nationwide and here to help!

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