Foreclosures Avoided with 422,000 in Short Sales and 850,000 in Loan Modifications in 2012

In 2012, banks/lenders completed more than 850,000 in loan modifications, at the same time the banking industry continued to advocate another foreclosure alternative—short sales, according to recent report from HOPE NOW, an alliance of mortgage servicers, investors, mortgage insurers, and nonprofit counselors.

Out of the 850K completed mods, 661K were proprietary modifications, and 189K were via the government’s Home Affordable Modification Program (HAMP), data from HOPE NOW revealed. For 2011, servicers completed 1.05 million in loan modifications. As of 2007, the number now stands at 6.06 million modifications, of which 1.1 million mods were through HAMP.

Since 2009, the industry has seen 1.15 million short sales, with 422,605 short sales occurring in 2012 alone. In 2011, completed short sales reached 372,168.

“In the past year, there has been unprecedented work from the industry with respect to short sales as a viable mortgage solution,” said Eric Selk, executive director of HOPE NOW. “For example, many mortgage servicers have staffed our borrower events with short sale specialists in order to help train real estate agents and created intake portals specifically for the short sale process.”

The group also reported foreclosure starts and completed foreclosure sales decreased in 2012 compared to 2011. For all of 2012, foreclosure starts numbered 1.92 million, down 14.8 percent from 2.25 million in 2011. Completed foreclosure sales fell 7.3 percent to 779,220 in 2012 from 840,186 in 2011.

Loans in danger of rolling into foreclosure status decreased as well as the inventory of 60-plus delinquencies shrunk in December 2012 from 2011. At the end of 2012, 2.52 million loans were past due 60 or more days, down 9.6 percent from 2.79 million during the same time in 2011. The findings are based on data from the Mortgage Bankers Association. This is largely due to the increase in short sales.

On a quarterly basis, completed loan modifications and short sales increased while foreclosure starts and sales were on the decline. From Q3 to Q4 in 2012, completed mods reached 185,608, representing an 8.3 percent quarterly increase.

Foreclosure starts plunged 27.2 percent in Q4 to 363,499, down from 499,362 in Q3, while foreclosure sales were fell 3.6 percent to 188,814 in Q4.

The industry continues to see the trend of decline in foreclosures and it is mainly due to the more efficient process and widespread of short sales and loan modifications. The servicers, HUD, Freddie, Fannie and investors continue to improve and fine tuning its process on short sales as well as advocating to the distressed homeowners on using short sales as an alternative to prevent foreclosures. More and more homeowners are now educated on what a short sale is and employees licensed short sale specialists to conduct the short sales. The success of a short sales hinges largely on the agent who is handling the short sale transactions.

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