"Lenders foreclosed on a record number of properties in September and in the third quarter, taking a bite out of the backlog of distressed properties where the foreclosure process was delayed by foreclosure prevention efforts over the past 20 months," said CEO of RealtyTrac James Saccacio.
Foreclosure filings, which include default notices, scheduled auctions and bank repossessions, rose 3% in September to 347,420, and increased almost 1% from September 2009.
In the third quarter, foreclosure filings rose nearly 4% to 930,437 from the previous quarter, but declined 1% from the same period last year. One in every 139 U.S. housing units received a foreclosure filing during the quarter, according to the RealtyTrac's Foreclosure Market Report for the third quarter.
"We expect to see a dip in those bank repossessions -- and possibly earlier stages of the foreclosure process -- in the fourth quarter as several major lenders have halted foreclosure sales in some states while they review irregularities in foreclosure-processing documentation that has been called into question in recent weeks," Saccacio added.
On Wednesday, all 50 states and the District of Columbia launched a joint investigation of the mortgage industry, following reports that officials mishandled documents and broke laws in foreclosing on hundreds of thousands of homeowners.
"If the lenders can resolve the documentation issue quickly, then we would expect the temporary lull in foreclosure activity to be followed by a parallel spike in activity," Saccacio said. "However, if the documentation issue cannot be quickly resolved and expands to more lenders we could see a chilling effect on the overall housing market."
Nevada continued to have the dubious honor of being the state with the highest foreclosure rate in the third quarter, despite a year-over-year decline in foreclosure activity. One in every 29 Nevada housing units received a foreclosure filing during the quarter, almost five times the national average. Arizona and Florida had second and third highest foreclosure rates.