Bank repossession of homes passed 100,00 for the first time in September, according to industry research firm RealtyTrac. A record total of 102,134 bank repossessions were reported for the month.

If unemployment remains high, as expected, and the mortgage foreclosure fiasco grid locks the housing market, the trouble could get much worse as 2010 rolls into the first quarter of 2011.

The RealtyTrac U.S. Foreclosure Market Report for the third quarter of 2010,  shows that foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 930,437 properties in the third quarter, a 4% increase from the previous quarter and a 1% decrease from the third quarter of 2009. This figure is one out of every 139 homes in the US.

Foreclosure filings were reported on 347,420 U.S. properties in September, an increase of 3% from the previous month, the firm said.

Foreclosure auctions were scheduled for the first time on a total of 372,445 properties in the third quarter, a total of 269,647 properties received default notices, and bank repossessions  hit a record high  with a total of 288,345 properties repossessed by the lender.

Nevada, Florida, Arizona, and California continue to be the states hit hardest by the real estate disaster which began in 2007. One in every 29 Nevada housing units received a foreclosure filing during the quarter, almost five times the national average.

The inexorable cycle of regional high levels of joblessness which causes local housing market troubles continues. Nevada has one of the highest unemployment levels in the US and the jobless rate in Las Vegas is more than 15%. Overbuilding in the region caused a bubble which has created an inventory of unsold homes that would take more than 20 months to relieve if sales continue at the current pace.

The mortgage market is likely to remain troubled even with mortgage interest rates at historic lows. Potential buyers still face tough loan standards at banks shocked by home loan write-offs. Federal tax benefits for home buyers have expired. Perhaps the worst hurdle which faces the housing market is the perception among those in the market for homes that prices could drop another 5% to 10%.

Home prices could indeed fall further.  A period of gridlock could be at its beginning now that banks and mortgage firms have begun to examine their foreclosure processes. Forty state attorneys general have joined in an investigation of the practices. This action alone could take months to conclude.

Housing and mortgage issues will not be resolved at the state level. The emerging scandal over how foreclosures were processed could keep people concerned about titles from considering buying homes at all. Homeowners evicted from their houses may attempt legal means to get them back.

The issues preventing housing from recovery will have to be handled at a federal level. In all probability, Fannie Mae and Freddie Mac will need to back the loans under investigation on foreclosed homes until the US Attorney General reviews the matter. This would at least keep 40 jurisdictions from attempting to investigate the problem piecemeal. The cost of Fannie Mae and Freddie Mac to cover foreclosed loans may be billions of dollars on top of the $150 billion that taxpayers have put into them, but it is a small price to pay if it prevents a second housing crisis which the US can hardly afford.

Douglas A. McIntyre

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.