The sale of homes in foreclosure was still an issue for the housing market in the third quarter of 2011, according to a new report from RealtyTrac. President Barack Obama announced plans to develop a housing task force that will tackle improper mortgage loan bundling, one of the issues that helped the financial system crumble in 2008.
Foreclosure Sales Comprise 20 Percent of Sales
The new RealtyTrac report revealed that foreclosure sales comprised 20 percent of all U.S. residential sales during the third quarter of 2011.
While this share represents a significant decline from the same period in 2010 when foreclosed homes made up 30 percent of residential sales, it’s definitely higher than healthier periods when they made up less than 5 percent of sales.
As with previous reports of declines, the year-over-year drop in sales was said to be the result of fewer foreclosures making it through the pipeline thanks to the robo-signing scandal that plagued the housing market in 2010 and 2011.
With more foreclosures to be processed by banks, experts expect real estate owned (REO) properties to make up a large portion of sales for the months, and possibly years, to come.
Mortgage Loan Bundling to be Addressed with New Task Force
Another issue that has plagued the housing market and was said to be a direct cause of the financial crisis of 2008 is mortgage loan bundling.
Prior to the crisis, many financial firms had begun to bundle thousands of mortgages into debt securities for investors with the guarantee that buying them would return major profits as homeowners began to pay off their monstrous home loans.
The only problem is that many of the homeowners had taken on adjustable-rate and balloon mortgages that increased significantly during the loan term. Within a few years, they could no longer afford their payments and began defaulting in droves, meaning investors who expected returns had lost their money.
In President Barack Obama’s State of the Union address on Tuesday night, he announced his plans to create a new housing task force that would crack down on financial firms behind the mortgage loan bundling scandal, focusing mainly on Wall Street firms and big banks thought to have escaped scrutiny.
The scandal contributed largely to the downfall of the financial sector and resulted in millions of jobs lost—a contributor of the foreclosure problem still plaguing the housing market—and Obama says he wants the task force to finally prosecute these crimes and help homeowners who are still suffering under unaffordable mortgages.