Home Repossessions Continue to Rise as Banks Clear Backlogs

By: Jann Swanson • Fri, Aug 13 2010, 10:32 AM

RealtyTrac reported that a total of 325,229 properties were the subject of some form of foreclosure filing during July. This is a 4 percent increase over the 313,841 filings reported in June but is down 10 percent from the number in July 2009. The July figure equates to a filing for one in every 397 housing units in the country.

The Irvine California company which issues a monthly U.S, Foreclosure Market Report tracks documents filed in all three phases of foreclosure:

Notice of Default (NOD) and Lis Pendens (LIS). This is the first legal notification from a lender that the borrower on a mortgage loan has defaulted under the terms of their mortgage and the lender intends to foreclose unless the loan is brought current.
Auction - Notice of Trustee Sale and Notice of Foreclosure Sale (NTS and NFS); If the borrower does not catch up on their payments the lender will file a notice of sale (the lender intends to sell the property). This notice is published in local paper and contains information pertaining to the date, time and subject property address.
Real Estate Owned or REO properties : "REO" stands for "real estate owned" and typically refers to the inventory of real estate that banks and mortgage companies have foreclosed on and subsequently purchased through the foreclosure auction if there was no offer higher than the minimum bid.

The pattern of notices, however, continues to show an overall improvement in that fewer houses are moving into the foreclosure process while more are being cleared out through a completion of that process.

Notices of Default were received by 97,123 properties, an increase of 1 percent over June, but 28 percent lower than one year earlier. The figure is also 32 percent lower than the peak month of April 2009.

Auctions were scheduled for the first time on 135,248 properties nationwide. This is up 2 percent from June and down 2 percent from July 2009. This category peaked in March 2010 with 158,105 initial auction notices.

Actual foreclosures and repossessions were completed on 92,858 properties, up 9 percent from June and 6 percent year-over-year. Properties taken into owned real estate inventories were at the second highest level since RealtyTrac began keeping data in 2005. The most active month was this past May when 93,777 properties were foreclosed.

This data is representative of banks clearing out their huge backlogs of delinquent loans that have been languishing in modification programs. The HAMP program jointly administered by the Departments of Treasury and Housing and Urban Development, for example, has stepped up pressure on mortgage servicers to do something about the large number of borrowers who were stuck in the HAMP trial modification phase. As servicers responded, stepping up the pace of its decisions, The Obama's administration Housing Scorecard issued in late July reported that 60 percent of the trial modifications cancelled the previous month had been in trial status for at least six months.

RealtyTrac chief executive officer James J. Saccacio said "July marked the 17^th consecutive month with a foreclosure activity total exceeding 300,000. Declines in new default notices, which were down on a year-over-year basis for the sixth straight month in July have been offset by near record levels of bank repossessions, which increased on a year-over-year basis for the eighth straight month,"

As usual, Nevada, Arizona, and Florida topped the list of states with foreclosure activity last month. In Nevada, one in every 82 housing units received a foreclosure filing in July. This was up nearly 7 percent from June, but was down 30 percent from a year earlier, the 10^th straight month when the year-over-year rate dropped.

In Arizona there were a total of 16,298 filings in July or one in every 167 homes compared to 14,424 filings or one in every 189 homes in June, Virtually every one of the filings both months however, were either notices of auction or actual foreclosures. Only 8 notices of default were recorded in June and 14 in July.

In Florida there were filings on one in every 171 housing units, the same as the previous month. The actual total filings during the two months were also virtually identical - 51,550 in June, 51,557 in July.

California, with one in every 200 homes and Idaho with one in 240 homes receiving filings round out the top five states. Other states with high rates are Michigan (1 in 241); Utah (1 in 242); Illinois (1 in 269); Georgia (1 in 320) and Maryland (1 in 335).

While it is a national problem, the bulk of foreclosures are still concentrated in a few states, five of which account for 50 percent of all filings nationwide. California accounts for 21 percent of all filings and Florida 16 percent. The other three states which the largest number of filings are Illinois, Michigan, and Arizona.