Why Foreclosures Could Be Set to Rise Again

foreclosureLender processing delays reduced the number of U.S. homes taken back by banks in the first three months of the year and contributed to a sharp drop in properties entering the foreclosure process.

But March foreclosure data suggest foreclosure activity may be starting to creep higher, as lenders make progress tackling a backlog of pending foreclosure cases.

Banks repossessed 215,046 homes in the January to March quarter, down 6 percent from the fourth quarter and down 17 percent versus the same period last year, foreclosure listing firm RealtyTrac Inc. said Thursday.

The number of properties receiving a notice of default for the first time also declined, falling 17 percent from the fourth quarter and 35 percent from the first three months of last year, the firm said.

The drop-off in foreclosure activity stems from foreclosure documentation problems that came to light last fall. Many banks have since revisited thousands of foreclosure cases, delaying the processing of new foreclosures. The logjam has been compounded by court delays in states such as Florida, New York, and New Jersey, where foreclosures must be approved by a judge.

Still, between February and March, the number of properties repossessed by banks rose 13 percent, the highest increase in a year. And homes receiving their first notice of default climbed 16 percent.

"The bottleneck is opening up a little bit and we're starting to see the first inklings that we might be getting back to more normal levels of foreclosures," said Rick Sharga, a senior vice president at RealtyTrac.

By normal levels, Sharga means the elevated pace of foreclosure activity that led to more than 1 million homes being taken back by lenders last year.

Roughly 5 million borrowers are at least two months behind on their mortgages, by some estimates. And many of the factors that have contributed to the foreclosure crisis are likely to continue driving foreclosures this year, including high unemployment, a weak housing market, falling home values and tighter lending standards.

The foreclosure processing delays remain most pronounced in states where judges play a role in the foreclosure process.

In Florida, for example, foreclosure activity has fallen 47 percent since the fourth quarter, and it's taking nearly 17 months from the time a property receives its initial notice of default until it is put up for auction. That process normally takes about four months, Sharga said.

In New Jersey and New York, other states where judges play a role in foreclosures, the process is taking nearly 27 months.

"The timelines have extended across the country as the foreclosure problem has spread, but those are probably the most egregious examples," Sharga said.

In states where judges aren't part of the process, home repossessions rose by 9 percent in the first quarter versus the fourth quarter, RealtyTrac said.

The firm has predicted between 1 million and 1.2 million homes will be taken back by lenders this year, but that forecast may have to change if the pace of repossessions doesn't pick up in coming months.

Lenders foreclosed on 215,046 properties during the quarter, between 60,000 and 90,000 short of the pace needed to achieve RealtyTrac's full-year forecast.

Sharga expects that backed-up court calendars and the backlog of foreclosures lenders are working to process will continue to slow foreclosure activity overall for at least another quarter.

That may provide some relief to the real estate market by limiting the number of new foreclosed homes being put up for sale. Foreclosures often sell at a steep discount, which can contribute to bring down the value of nearby homes.

In all, some 681,153 homes received a foreclosure-related notice in the first quarter, down 15 percent from the fourth quarter and down 27 percent from a year earlier. That translates to one in every 191 U.S. households, RealtyTrac said.

The firm tracks notices for defaults, scheduled home auctions and home repossessions - warnings that can lead up to a home eventually being lost to foreclosure.

At a state level, Nevada registered the highest foreclosure rate in the nation, with one in every 35 households receiving a foreclosure notice in the first quarter.

Arizona posted the second-highest foreclosure rate, thanks in part to a 26 percent spike in home repossessions. While California ranked third, with one in every 80 households receiving a foreclosure notice during the quarter.

Declines in foreclosure activity in states like Florida helped boost Utah to the No. 4 spot, followed by Idaho.

Rounding out the top 10 states with the highest foreclosure rate in the first quarter were: Georgia, Michigan, Florida, Colorado and Illinois.

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jgrl360

and obama wants to raise 1 billion for his campaign for 2012???? How many houses would that save, families to feed, bills to be paid ----- CUT FOREIGN AIDE - REDUCE CORPORATE TAX TO 15% - ABOLISH NAFTA AND RAISE CUSTOM RATES ON IMPORTS - AND ELIMINATE THE 7 YEAR "PUNISHMENT" CORP MUST ENDURE TO PURCHASE NEW EQUIPMENT ------ THESE ARE THE THINGS THAT NEED TO BE DONE TO GET JOBS BACK AND GET THE USA BACK ON ITS FEET WAKE UP AMERICA - STUDY YOUR HISTORY - DO YOU REALLY IN YOUR HEART BELIEVE THE GOVERNMENT CARES FOR YOU? THINK AGAIN - THEY JUST WANT YOU MONEY.

April 15 2011 at 7:11 AM Report abuse +1 rate up rate down Reply
atx888

Mortgage interest tax deduction should be abolished. People got conned into thinking that owning a home will lower their taxes. FALSE. You actually pay the bank more than you would have paid the IRS. BTW, why would someone like me who paid cash (no mortgage) get no tax break, whereas those who borrowed get a tax deduction?

April 15 2011 at 5:46 AM Report abuse +2 rate up rate down Reply
1 reply to atx888's comment
Jan

Lucky you! Most people csnt' come up with that much cash. Was it an inheritance? I bought my house in 2007 for 230K and it is now valued at 119k, and I am expected to just loose my arse on it because our congress let this housing bubble happen?

April 15 2011 at 6:29 AM Report abuse rate up rate down Reply
ezx2

And the crooks that created this mess still free and receiving bonus perks. Makes me sick. Corrupt politicians and federal agencies and turned a blind eye to those who created this great DEpression

April 15 2011 at 5:08 AM Report abuse +2 rate up rate down Reply
PeekachewsRevenj

Nonsense! The Home Builders Association and the Realtors Association predict strong recovery in the housing
market starting 2011. At least that's the propaganda they have been peddling all along. I guess maybe they can find
Chinese buyers, as they now have a middle class, while ours dies.

April 15 2011 at 4:09 AM Report abuse +1 rate up rate down Reply
1 reply to PeekachewsRevenj's comment
thedtecter

I spoke with a realtor about two months ago who said, internally, the realtor's associations are not expecting to see price stabilization and recovery for 5 TO 10 years. When you see that there are 40% more homes out there than can be disposed of it leads me to believe this is accurate. Granted, as a group, their income earnings were hit hard but if this is true it just shows the housing market is still way over-valued. This generates four negatives for the market: 1) many homeowners, on average, still owe way more than their house is worth and will never regain that value 2) homeowners would rather risk a default with a lender than take a loss 3) banks won't lend because they know a property is still likely to be worth much less a year from now 4) realtors are trying to squeeze out as much as they can from home sales to make a living and are keeping home prices inflated. Banks' balance & asset sheets would plummet into the red if they had to revalue all homes at a true current value. What do you suppose would happen to the banks when their investors see this? Part of the con to keep the banks and the power they wield from imploding.

April 16 2011 at 7:47 AM Report abuse +1 rate up rate down Reply
ajgorm

Melt downs dont exist .Banks get bailed out with more money.We are being conned. Banks need to lend us money no matter what it is our constitutional right is what I believe (nail bighter , you must agree ). If they dont our country will implode. All we do is print more money when we go broke then call the bank a new name. Melt downs dont exist. Economies get bamboozled by bankers and cronies in charge that rearrange the wealth for odd reasons. Countries dont go belly up. Numbers just get too big to fail. If they fail no problem. We bail them out. Melt downs are a fantasy a fear tactic to get the sheep to act like liberal goats that freeze when scared. Look at our housing market banks can hold on to a forclosure at our expense appraising it higher than it could ever be sold for listing it on their books for three times what it is worth and stealing taxes from us tax payers our government looks the other way they could collect billions but they dont they are allowed to get away with it. audit the bank books for foreclosure fraud if you think melt downs are real for banks. They get rewarded for false numbers and never get checked. It is one big game we take it seriously they dont. signed just guessing.

April 15 2011 at 2:52 AM Report abuse rate up rate down Reply
lulu0510

Obama's going to tax the rich! Dont believe it !! He says that to get the millionaires to contribute to his campaign for which he will give them special tax breaks. Look at General Electric. The money that BP was suposed to pay the fishing industry and other businesses on The Gulf is going instead to organizations that support Obama's campaign financially.. The stimulus money supposed to create jobs went instead to publidc employees and unions who will contribute to Obama's campaign. Middle class America is being sold into slavery.

April 15 2011 at 1:00 AM Report abuse +2 rate up rate down Reply
lulu0510

If you think things are bad now, just wait. OBAMA WANTS TO TAKE AWAY THE HOME MORTGAGE TAX
DEDUCTION!!! That will absolutely destroy our economy. Thousands of homes will be foreclosed.. Constructrion will cease. Jobs will be lost. The increased tax revenue will be spent to finance Obama's 2012 campaign by laundering it through phony stimulus plans. This maniac president must be stopped.

April 15 2011 at 12:48 AM Report abuse +4 rate up rate down Reply
1 reply to lulu0510's comment
atx888

Mortgage interest tax deduction should be abolished. People got conned into thinking that owning a home will lower their taxes. FALSE. You actually pay the bank more than you would have paid the IRS. BTW, why would someone like me who paid cash (no mortgage) get no tax break, whereas those who borrowed get a tax deduction?

April 15 2011 at 5:45 AM Report abuse +1 rate up rate down Reply
lpi2007

HOW ABOUT BECAUSE THE RECESSION HAD TURNED INTO THE DEPRESSION.. MONTHS AGO, LOUISVILLE PARANORMAL INVESTIGATIONS ......CHECK OUT OUR SITE

April 15 2011 at 12:00 AM Report abuse rate up rate down Reply
vieragam

Here in FL, it seems that every other house is vacant. Its pathetic and the housing values are still going down every week.

April 14 2011 at 11:31 PM Report abuse +7 rate up rate down Reply
Iselin007

If you look around you will notice homes with no activity just sitting there not listed for sale. Previous owners had to move and could not sell them so they just left . We have realstate signs and plain for sale signs all over the area. Must be a deluge of homes on the market with others in the back round on hold.

Not enough jobs being created at good pay to save the housing market which is why fraud loans were handed out after the Tech Bubble in 2000/2001. A decade of pretending the economy could support the housing market was proved wrong and nothing has changed to prove different.

April 14 2011 at 11:02 PM Report abuse +10 rate up rate down Reply