February 11th, 2010
01:06 PM ET

Financial Dispatch: Jobless claims and foreclosures drop

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Andrew Torgan
CNN Financial News Producer

The number of Americans filing first-time claims unemployment insurance fell sharply last week to the lowest level in more than a year

Initial claims for jobless benefits fell by 43,000 to a seasonally adjusted 440,000 in the week ended Feb. 6, the Labor Dept. said. And the number of people who continue to collect benefits for a week or more - known as continuing claims – dropped by 79,000 to just over 4.5 million in the week ended Jan. 30, the most recent data available.

A Labor Dept. spokesman said the snow storm that crippled much of the East Coast last week did not impact the number of jobless claims filed, but at least one analyst expects that next week's numbers – reflecting claims from this week - will definitely be impacted by Wednesday’s blizzard.

The largest increase in initial claims for the week ending Jan. 30 was in Pennsylvania (+10,495) with layoffs in the construction, trade, and service industries.

The largest decrease was in New Jersey (-1,819) due to fewer layoffs in trade and service industries.

Foreclosures drop in January

Foreclosure filings also dropped in January, but as our friends at CNNMoney.com caution - don’t get too excited just yet.

Foreclosure filings did drop by nearly 10% between December and January, according to RealtyTrac.

It’s not all beer and skittles, however. Filings rose 15% compared to a year ago, and the number of people who actually had their homes repossessed jumped more than 30%.

As for what states were hit the hardest, foreclosure filings dropped 18% year-over-year in Nevada, but it still remained the nation's leading foreclosure state with one household in every 95 receiving at least one filing during the month.

Arizona was the second-worst performer, with a rate of one household for every 129 receiving a filing. Florida and California followed with one in every 187 households.

The least affected state was South Dakota, which had a total of only 14 foreclosure filings during the month, one household in nearly 26,000. Vermont also maintained a nearly pristine record with just one household in every 20,841 getting hit.

Citigroup offers foreclosure alternative

Along those lines, CitiMortgage - one of the nation's largest mortgage servicers - is launching a pilot program Friday that’s designed to ease the pain of some homeowners heading for foreclosure.

Instead of borrowers falling further and further behind on their mortgages, leading to an eventual foreclosure sale, they can stay in their homes for up to six months, if they agree to then hand over the deed to the lender.

So let’s be clear here: people are still going to lose their homes - but in a more orderly and less-expensive process. Banks typically evict homeowners immediately, so these six months should give people time to figure out their next move.

And their credit will take a less severe hit. Once the deed is handed over, the borrower walks away free and clear. Citigroup will even give folks losing their homes $1,000 for moving expenses.

This isn’t just a goodwill gesture, of course. It’s going to save Citigroup money too.

Foreclosure is a long, expensive process for the bank. So this will save Citigroup a lot - mostly in legal fees.

It also helps to alleviate the growing problem of borrowers simply walking away from their properties because they owe more on their mortgages than what their homes are worth.

Home prices fell 12% in 2009

The real estate roller-coaster ride continued last year as the median price of U.S. single-family home plunged 11.9% to $173,200.

The housing situation had been looking up earlier in the year, with prices gaining ground in the first nine months. But the increases weren't enough to push the median home price above 2008's bar of $196,600, according to the National Association of Realtors.

And then prices fell in the fourth quarter - dropping 2.9% compared to the previous three months and 4.1% compared to the last quarter of 2008.

Still, the quarter-over-quarter drop was encouraging to NAR, which tracks home prices and sales.

Commercial real estate: The next crisis?

Is another shoe about to drop? A congressional watchdog panel warned on today that mounting commercial real estate losses could endanger the banking system and thwart economic recovery.

A total of $1.4 trillion in commercial real estate loans will require refinancing in the next four years, the Congressional Oversight Panel said in a report. More than half of those loans are underwater, written for properties whose value has dropped like a rock.

The expected losses when loans go bad could hit between $200 billion to $300 billion and threaten 3,000 small and mid-size banks with a disproportionate share of commercial real estate assets on their books, according to the panel.

The report is intended to "wave a red flag" to the White House and Congress that the commercial real estate loan market is going to get a lot worse before it gets better.

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