Foreclosure Increase Induced by Moratorium?

Despite an increase in foreclosure starts in May, there is evidence that the Real Estate Market is indeed on the mend. Most likely, this jump in activity is due to the banks having just finished a moratorium, while they settled the $25 Billion government reimbursement legislature.  It's no different than many other spikes after other previous moratorium  that banks have either self enforced or government imposed.  It seemed like more of a hesitation than a true moratorium this time around, and this isn't the same market as 2011 or 2010. It's quite a bit healthier indeed.

Before we get our panties in a bunch it is important to note the reasons for this increase:

1. The jump in foreclosure starts is not indicative of a new batch of borrowers missing payments.  In fact, new delinquencies fell during Q1 2012.
2. Many "Shadow inventory" homes that banks have been holding onto during the "moratorium" will be hitting a much stronger market of already reduced inventory. From my professional experience here in Oregon, many banks are cleaning up the homes and putting them on the market for more money than one would expect, and receiving multiple offers.
3. "The May numbers were up the month after that settlement was completed is an indication that lenders are more confident that there are clear ground rules to foreclose now, so they can play by the rules," said Daren Blomquist, RealtyTrac's vice-president.
4. Many of the new foreclosure starts will most likely end in short sales, up 25 percent in the first quarter of 2012 reaching a three-year high. This due to lenders being able to get a higher price in a short sale than if they repossess them and then put them back on the market.

Source: Reuters.com,  U.S. foreclosures up for 1st time in 27 months by Anna Louie Sussman

See Full Article: http://www.reuters.com/article/2012/06/14/usa-housing-realtytrac-idUSL1E8HD88120120614