The number of U.S. homes headed for foreclosure fell during the second quarter, marking the first such drop since the housing slump began in 2006, but the improvement may be fleeting as the number of newly delinquent homeowners rose, a banking group said on Wednesday.
The percentage of loans in the foreclosure process declined last quarter to 4.57 percent from 4.63 percent in the first quarter, partly because of lender efforts to ease payments for homeowners and the impact of temporary home purchase tax credits, the Mortgage Bankers Association said in a report.
Foreclosures could head higher in coming months, however, as the percentage of borrowers at least one payment behind resumed its rise after easing late last year, the MBA said in a report that covers more than 85 percent of the market.
The pipeline of delinquencies and huge rise in properties on balance sheets of financial institutions last quarter has aggravated concerns that the critically important housing sector will drag the U.S. economy back into recession.
Foreclosures have also taken a toll on consumer confidence and are steering buyers away from the market as they expect the supply to pressure prices still lower. The shadow inventory of homes likely headed to market is about 4.5 million, Michael Fratantoni, vice president for single-family research and policy development at the MBA, said on a conference call.
On the surface, there is good news on the foreclosure front, but not on short-term delinquencies, said MBA Chief Economist Jay Brinkmann. There's a little pause. It could be short-term factors instead of a trend.
The number of loans 30 days past due, at 3.51 percent last quarter versus 3.45 percent in the first, show a correlation with the recent rise in unemployment benefit claims, he said.