Is a ‘Mini’ Foreclosure Wave Coming?

The housing market has made big gains in recent months with sales and prices, but a surge in foreclosures may soon strike again.

Foreclosures are down 18 percent year-over-year, and the threat has lessened in recent months. But the latest agreement between the Federal Reserve/Comptroller of the Currency and the 10 largest mortgage servicers is expected to create a “mini-wave” of foreclosures soon, RISMedia reports.

In the latest agreement, mortgage servicers will be ending reviews of loans that were foreclosed in 2009 and 2010. But, in exchange, they must pay $8.5 billion to eligible home owners in loan assistance. The latest agreement also provides incentives so servicers will favor loan modifications and principal pay-downs over foreclosing on home owners.

“The settlement will likely increase the pace of foreclosures that have been caught up due to a lengthy review process over the next 12 months,” RISMedia reports. Foreclosures often create downward pressure on overall home values.

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