Latest Foreclosure Numbers Show 97.5% of Homeowners Pay on Time...

That could be an alternate title to the news story claiming Homes in foreclosure top 1 million, but it probably wouldn't gain that much attention. As they say in the media, "if it bleeds, it leads."

The news on Wall Street today was wildly positive. Stocks closed up sharply, unemployment was down for the week and even retail sales were up last month. The American consumer is alive and well.

I'm not trying to downplay the foreclosure situation, because the numbers are truly staggering. If we take into account the fraud and speculation over the past few years, many of the homes being "lost" were never occupied to begin with. Consider some of the fraud stories covered here: Casey Serin had 8 empty houses lost to foreclosure; Zareh Tahmassebian several dozen; Brad Kitchen also had dozens. Workouts for those loans were simply not possible.

Consumers are taking advantage of the deals in real estate owned (REO) properties. Sentiment has turned.

The revival will probably begin in the areas hit hardest by the bust: in Florida, Las Vegas, and the honeycombed tracts that flank the broad freeways east of Los Angeles known as the Inland Empire. (Indeed, home sales in Southern California surged 22% from March to April, hitting their highest levels since August.) Why will housing come back? For a reason as solid as floor joists: The entry-level buyer, for the first time in years, is finding that owning a new house is suddenly just as cheap as renting. "Those first-time buyers got locked out by high prices," says John Karevoll of DataQuick, a research firm that assembles data on the U.S. real estate market. "Now the buying activity that was on hold is starting to come back."

Now that I'm working with clients across the country, I'm witnessing this activity on a daily basis. I had one client in Las Vegas place 20 offers before one was accepted today. He was being out-bid on REO homes by $40-50 thousand. Agents and clients in California and Arizona are reporting similar situations. Activity doesn't guarantee appreciation...home prices could stabilize at current levels for some time. The important point is sentiment has changed.

Mortgage rates are reacting to this change in sentiment having gone up .75% in about the last three weeks. The last two days have been particularly volatile. I suspect rates will continue to trend up as the economy continues to show signs of improvement.

It makes sense that mortgages will cost more, both in rate and costs. Lenders have already increased prices based on credit scores, loan to value and loan amount. Standard fees have increased as well. I liken the increased costs to retail shops that have to increase prices because of shoplifting. Though we have a special name for mortgage theft - fraud - the bottom line is it's still theft. Those mortgage losses, reflected in that 2.5% foreclosure rate, are being passed on to new borrowers. Further, the bankrupt and closed lenders actually decrease the amount of competition in the marketplace, making the survivors of this crisis the "only game in town."

As heartbreaking as a foreclosure is to a homeowner that actually occupied the property, the current environment is clearing through a lot of fraud and is presenting buying opportunities to prospective homeowners previously priced out. We're returning to "normal"...whatever "normal" is.And here is the rest of it.