Worst of foreclosure crisis yet to come for Utah, U.S.

This is an archived article that was published on sltrib.com in 2011, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

The bleakest year in the foreclosure crisis has only just begun.

Lenders in Utah and the rest of the nation are poised to take back more homes this year than any other since the U.S. housing meltdown began in 2006. About 5 million borrowers are at least two months behind on their mortgages, and industry experts say more people will miss payments because of job losses and loans that exceed the value of the homes in which they are living.

Rick Sharga, a senior vice president at foreclosure tracker RealtyTrac Inc., said, "2011 is going to be the peak."

The firm predicts 1.2 million homes will be repossessed this year — up from 1 million in 2010.

Utah remains one of the hardest-hit states in terms of foreclosures, with one in every 29 households —32,520 properties — receiving a foreclosure filing last year, according to RealtyTrac. That's up nearly 20 percent from 2009. Only Nevada (one in 11 homes), Arizona (one in 17), Florida (one in 18), and California (one in 25) have higher rates.

Utah's rate remains significantly higher than the pace nationally, which is one in every 45 households, mostly because the state was one of the last to enter the housing downturn and will be among the last to reach a foreclosure peak. Nationwide, nearly 2.9 million properties received a foreclosure-related filing last year, a record number that is up 1.67 percent from 2009.

RealtyTrac keeps an eye on notices for defaults, scheduled home auctions and home repossessions — warnings that can lead up to a home eventually being lost to foreclosure.

On Thursday, Freddie Mac reported that fixed mortgage rates dipped this week for the second straight time, extending a sliver of hope for some homeowners who want to refinance.

The average rate on a 30-year mortgage dropped to 4.71 percent from 4.77 percent the previous week. The rate on a 15-year loan, a popular refinance choice, slipped to 4.08 percent from 4.13 percent.

But both are a half-point higher than the lows they reached in November. The 30-year loan rate hit a 40-year low of 4.17 percent and the 15-year mortgage rate fell to 3.57 percent, the lowest level on records dating to 1991.

The dip has led more borrowers to apply for refinancing, but would-be buyers remain hesitant, according to Wednesday's mortgage indexes from the Mortgage Bankers Association. It will take more than low mortgage rates to jump-start a housing market plagued by high unemployment, falling prices and tighter credit standards.

The glut of foreclosures has compounded the problem, and although the pace moderated in the final months of 2010, that isn't expected to last.

Foreclosures are expected to remain elevated throughout the year, pushing home prices down another 5 percent nationally — perhaps more in Utah — before finally bottoming out.

The number of homes nationally that received at least one foreclosure-related filing in December was the lowest monthly total in 30 months. Total notices, including notices of default and bank repossessions, fell 1.8 percent from November and 26.3 percent from December 2009, RealtyTrac said.

Banks temporarily halted actions in some parts of the country — although not Utah — against borrowers severely behind on their payments after allegations of improper evictions surfaced in September.

However, most banks have since resumed foreclosures, and the first quarter will probably bear that out, Sharga said.

The pain will be most acute in states that have already suffered the worst. For the most part, it will be states that saw the biggest housing booms —Nevada, Arizona, Florida and California. They will be joined by states hit hardest by the economic downturn, including Michigan and Illinois.

More than half the country's foreclosure activity came in five states in 2010 — California, Florida, Arizona, Illinois and Michigan.

Together, these states recorded almost 1.5 million households receiving a filing, despite year-over-year decreases in California, Florida and Arizona.