Experts See No Letup in Foreclosure Trend: 'This may be a time when you want to start putting some human intervention into that process.'.

SAN DIEGO -- Executives at RealtyTrac expect foreclosure filings to increase another 20% to 25% this year, on top of a 42% rise in filings posted in 2006 compared with 2005.

"We think that's a pretty conservative estimate," RealtyTrac vice president Rick Sharga said during a panel session at the MBA Mortgage Servicing Conference here.

Not all foreclosure filings result in a foreclosure taking place, as some loan defaults are cured or worked out after the lender has initiated foreclosure actions. However, the rising foreclosure workload and negative publicity associated with foreclosure activities pose a host of challenges for the lending industry.

The rise is not unexpected given the increase of subprime credit quality lending and the slowing of the housing market. But Mr. Sharga said loan servicers need to understand that rising home prices are no longer going to help many borrowers sell their home or refinance out of temporary financial problems. He noted that subprime mortgages make up an estimated 13.6% of outstanding home loans.

"The message that lenders got was to go make mortgages available for everybody," he said. "Well, I've been in business long enough to know that everybody makes a lousy target market."

The headline risk associated with rising foreclosure numbers means that the home loan industry could face the risk of "draconian" legislation that would scale back subprime lending and proscribe restrictions on loss mitigation and default management activities, according to lawyers who spoke during the panel session.

Mr. Sharga said that increasingly, subprime lending is associated with "predatory" lending and foreclosure activity in public discourse. And mounting evidence that the vintage of loans originated in 2006 is showing signs of weak credit is likely to add to the problem.