Soaring foreclosures are continuing to raise questions about the mortgage industry's claims that lenders are making a dent in the housing crisis.
Foreclosure filings last month were up nearly 50 percent compared with a year earlier. Nationwide, 261,255 homes received at least one foreclosure-related filing in May, up 48 percent from 176,137 in the same month last year and up 7 percent from April, foreclosure listing service RealtyTrac Inc. said Friday.
In North Carolina, foreclosure actions were up almost 24 percent compared with a year ago, well below the national average. Not all filings result in a foreclosure. Homeowners, for example, sometimes negotiate a payment plan with lenders or get caught up on payments.
The latest grim foreclosure news comes as criticism mounts that efforts by government and the mortgage industry to stem the tide of foreclosures aren't keeping up with the rising number of troubled homeowners. Critics say a Bush administration-backed mortgage industry coalition, dubbed Hope Now, is falling far short.
“It's clear that these voluntary efforts in and of themselves cannot really make a dent,” said Allen Fishbein, director of credit and housing policy at the Consumer Federation of America. “Government intervention is going to be necessary.”
Mark Zandi, chief economist of Moody's Economy.com and an adviser to Republican John McCain's presidential campaign, wrote earlier this week that “the Bush administration's efforts to encourage loan modifications and delay foreclosures are being completely overwhelmed.”
A Credit Suisse report from this spring predicted that 6.5 million loans will fall into foreclosure over the next five years, reaching more than 8 percent of all U.S. homes.
A new government report released Wednesday found that among mortgages held by nine large banks, including Bank of America and Citigroup Inc., foreclosures climbed to 1.23 percent of all loans in March from 0.9 percent in October.
The industry has continued to favor repayment plans, which help borrowers get back on track after missing a few payments, rather than permanent loan modifications, such as lower interest rates.
The combination of weak housing sales, falling home values, tighter mortgage lending criteria and a slowing U.S. economy has left financially strapped homeowners with few options to avoid foreclosure. According to the RealtyTrac report, one in every 483 U.S. households received a foreclosure filing in May, the highest number since RealtyTrac started the report in 2005 and the second-straight monthly record.
Foreclosure filings increased from a year earlier in all but 10 states. Nevada, California, Arizona, Florida and Michigan had the highest statewide foreclosure rates.
In Nevada, one in every 118 households received a foreclosure-related notice last month, more than four times the national rate. In California, it was one in every 183 households.
Rick Sharga, RealtyTrac's vice president of marketing, said foreclosures are unlikely to peak until sometime this fall, as more loans made to borrowers with poor credit records reset at higher levels. “I don't think we've seen the high point,” he said.
About 50 to 60 percent of borrowers who receive foreclosure filings are likely to lose their homes, Sharga said. The rest are likely to be able to sell or refinance.
Critics have questioned the accuracy and completeness of RealtyTrac figures, but they're widely used as one of the few, frequently updated sources of local foreclosure information.