Peak Corporate Network Principal Eli Tene Warns of Increased Foreclosure Starts on the Horizon as a Result of Recent Increases in Loan Modification Re-Defaults

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New data indicates rise in foreclosure filings for 2015 with possible links to nationwide wave of loan modification re-defaults associated with government-subsidized loan modification programs.

Eli Tene, Principal and Managing Director, Peak Corporate Network Entities

Eli Tene, Principal and Managing Director, Peak Corporate Network Entities

The dramatic increase in repeat foreclosures foreshadows a new era of defaults, and along with it a return to increased inventories of distressed assets to investor balance sheets.

Citing a newly-released housing industry analysis, Eli Tene, Principal and Managing Director of the Peak entities, expressed concern over the uncharacteristic spike reported in January 2015 Notice of Default (NOD) filings. “While an improving economy and new regulations governing lenders and servicers have resulted in a steady decline in mortgage defaults since the height of the recession in 2008,” states Tene, “this new wave of mortgage defaults is a cause for concern. Foreclosure now looms for a new wave of distressed homeowners despite prevailing sentiment that the crisis is over.”

Tene alludes to analysis from Black Knight Financial Services released earlier this month reporting foreclosures at a 12 month high, with repeat foreclosures comprising over half of recorded starts with an increase of 11% over December 2014 starts. The analysis also reflects the stark contrast in foreclosure filings occurring in judicial and non-judicial states. “While it’s encouraging that foreclosure starts for January are nowhere near the levels we saw five years ago,” he says, “the dramatic increase in repeat foreclosures foreshadows a new era of defaults, and along with it a return to increased inventories of distressed assets to investor balance sheets." Tene is quick to point out, however, that the real victims at the end of the day are not the investors, but the “distressed homeowners who could find themselves facing eviction once again.”

Tene contends that permanent loan modifications structured under the Obama Administration’s HAMP programs factor into the rise in recent foreclosure starts. According to a January 2015 special report evaluating the ongoing progress of the government’s Troubled Asset Release Program (TARP) that earmarked an initial $30 billion to fund the HAMP initiative, nearly 238,000 permanent loan modifications arranged by lenders and servicers to help distressed borrowers are now in default (defined at 90 days or more past due on payments). And, as of December 31st, 2014, 10% of active HAMP loan modifications are behind one or two months on payments increasing the likelihood of a re-default. “The can is simply being kicked down the road,” observes Tene. “At some stage of the game, many of these borrowers will have to face the prospect that they are still dealing with extenuating circumstances that will eventually find them facing a protracted foreclosure process.”

Increased activity in the default servicing sector appears to support these findings. Kelli Espinoza, Executive Vice President overseeing operations at Peak Foreclosure Services, Inc. (http://www.peakforeclosure.com) which serves as the primary Peak entity specializing in a wide range of default servicing solutions to investors, acknowledges renewed file submissions from current clients, and is considering increasing staff to handle the work flow. “We’ve seen a steady flow of new files, despite reports that foreclosures are on the decline.” She continues, “Perhaps from a macro level analysis, there may appear to be a reduction in defaults, but based on current activity we’re anticipating a full pipeline of foreclosure filings for the next few quarters.”

“It’s important to note,” Tene concludes, “that past programs to assist distressed homeowners have addressed the symptoms of a previously raging housing crisis, but haven’t enacted a true cure. The fact that thousands of Americans could lose their home is still real. Lenders and servicers could face a deluge of defaults under new regulatory conditions that complicate the already complex process of loss mitigation.”

As a leading authority in the real estate industry, The Peak Corporate Network is a group of companies that provides a full array of comprehensive real estate services nationwide, including commercial and residential brokerage services, mortgage financing, insurance services, loan servicing, escrow services, short sales, foreclosure processing and 1031 exchange. For more information, visit http://www.peakcorp.com.

The Peak Corporate Network is a brand that represents a group of related separate legal entities, each providing its unique set of real estate services.

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Wendell Grayson
@PeakCorpNet
since: 08/2010
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