New foreclosure numbers sound good, but...
Big banks and state attorneys general have reached a settlement over abusive foreclosure practices.
Kai Ryssdal: There's been an underlying buzz this week that there's a big mortgage fraud settlement due any day now. Attorneys general from about 40 states are working on it.
While we wait, the research firm CoreLogic said today the number of completed foreclosures fell by nearly 25 percent last year. Promising, on the face of it.
Until you realize that settlement -- when it comes -- could flush a whole new set of foreclosures onto the market. Marketplace's Adriene Hill explains.
Adriene Hill: The foreclosure market should flow pretty smoothly, like water through pipes: a homeowner is delinquent, the bank forecloses, the house flows through the system and back to the housing market as a whole.
Right now, says CoreLogic’s Sam Khater.
Sam Khater: The flow of foreclosures is declining.
But that flow hasn’t slowed down because a whole lot less people are in trouble.
Turns out our pipes have a big, gross hairball clogging them up.
Greg Hallman is a Senior Lecturer at the University of Texas at Autin’s McCombs School of Business.
Greg Hallman: Since the robo-signing scandal came to light. It’s been my impression that the foreclosure process in this country is pretty much ground to a halt.
The robo-signing clog, he says, was created when banks got busted for improperly completing foreclosure filings. Banks have been too afraid to move ahead with other foreclosures until the mess is cleared up.
But the settlement that’s expected between states and the banks could change that. It’s like Draino. Clearing things up for the banks. And making the foreclosure pipes run a whole lot faster.
Hallman: The system will work better in the long run when it gets unclogged. But really it will speed up a process that is painful for everyone involved.
The pain will involve more foreclosures. CoreLogic expects they’ll bump back up to 2010 levels.
More foreclosures means more housing supply, in an already flooded market. Which could mean -- you guessed it -- even more pain in the form of falling house prices.
I'm Adriene Hill for Marketplace.