Forclosure Crisis: No Longer a Crisis

Last month, the number of new foreclosure filings hit its lowest level in almost eight years, according to RealtyTrac, an online marketer of foreclosed properties.

Steadily increasing home prices and a large decline in borrowers who owe more on their mortgage loans than their homes are worth have helped in pulling us out of the foreclosure crisis.

Our nation has been dealing with the foreclosure crisis since the housing bubble burst in 2006. Loans that originated during the most inflated years of the housing bubble account for the bulk of foreclosure inventory in 2013. However, despite the number of bad loans originated during the height of the housing bubble, much tighter lending standards over the past few years and recently rising home prices have caused foreclosure activity to continue to see a downward trend.

Even loans guaranteed by the Federal Housing Administration, which are considered particularly risky due to their low down payment requirement, appear to be performing markedly better since 2010. New FHA loans are generating surplus funds, which are being used to offset losses from past loans.

While we may be out of the foreclosure crisis, there is still a lot of clean up left behind by the housing bust. Those in the housing and mortgage industries, as well as the policy makers, need to learn from our past mistakes and continue to be cautious as to avoid any future crisis. 

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