Judicial States Working Through Huge Backlog of Distressed Properties
Judicial states playing catchup were behind a rise in foreclosure activity in October according to RealtyTrac's U.S. Foreclosure Market Report. Foreclosure filings - default notices, scheduled auctions and bank repossessions - were reported on 133,919 U.S. properties in October, a 2 percent increase from the previous month but a 28 percent decrease from a year ago. This represents a filing on one in every 978 U.S. housing units.
While most of the components of foreclosure activity are decreasing on a national basis there are increases, some of them large, in a number of states. States with a judicial foreclosure system, one in which the courts must approve certain steps in the process, continue to work through what are in some cases huge backlog of distressed properties. There were a total of 30,023 scheduled judicial foreclosure auctions nationwide in October, up 10 percent from the previous month and up 7 percent from a year ago, the 16th consecutive month of annual increases.
States with the biggest annual increases in scheduled judicial foreclosure auctions included Maryland (+177 percent), Delaware (+142 percent), New York (+98 percent), New Jersey (+97 percent), and Pennsylvania (+58 percent).
"The backlog of delayed judicial foreclosures continues to make its way through the pipeline, with many of these properties now being scheduled for the public auction after starting the foreclosure process last year or earlier this year," said Daren Blomquist, vice president at RealtyTrac. "Lenders are likely moving these properties more rapidly to the public auction given that there is strong demand from institutional buy-to-rent investors at the auction and that rising home prices mean more of the loan losses can be recouped, either by selling to an investor at the auction or by repossessing the property and reselling as bank owned."
Foreclosures were initiated on 58,939 properties nationwide, an increase of 2 percent from September but down 34 percent from one year earlier. October was the 15th consecutive month where foreclosure starts have decreased on an annual basis. Starts increased in 22 states and some of these increases were substantial including in Colorado (+124 percent), Florida (+36 percent), and Illinois (+30 percent).
Foreclosures were completed (i.e. bank repossessions or REO) on a total of 37,775 bank repossessions nationwide in October, down 1 percent from the previous month and down 29 percent from a year ago - the 11th consecutive month where bank repossessions have decreased annually. Fifteen states saw repossessions increase from a year ago, including Oklahoma (+59 percent), Maryland (+54 percent), Virginia (+47 percent), Ohio and Washington (+30 percent each.)
RealtyTrac quoted Oklahoma City/Tulsa real estate executive Sheldon Detrick about the large increase in his state. "People who defaulted three years ago are just now beginning the rest of the foreclosure process, which explains the recent rise in bank repossessions in Oklahoma. When home prices were heading downward banks would sometimes send default notices to homeowners but allow them to stay in the home without making payments if the homeowner would maintain the home and keep it in good condition. Now that the economy is improving and home prices are rising, banks are willing to complete the foreclosure process if homeowners don't start making their payments again."
Perennial foreclosure hotspots Florida and Nevada continue to top the charts. Florida saw a 22 percent month-over-month increase in foreclosure activity driven primarily by a 36 percent increase in foreclosure starts. A total of 26,962 Florida properties had foreclosure filings during the month, one in every 332 housing units. Nevada, while still second in activity nationwide, saw a 39 percent decrease from September's 21 month high when many banks apparently rushed to complete foreclosures ahead of implementation of the Nevada Homeowner Bill of Rights.
Maryland posted the nation's third highest state foreclosure rate in October, up from the No. 4 spot in September, thanks to a 10 percent monthly increase and 201 percent year-over-year increase in foreclosure activity, the 16th consecutive month where Maryland foreclosure activity has increased on an annual basis. One in every 516 Maryland housing units had a foreclosure filing in October.
Other states in the top ten were Ohio where one in every 525 housing units received a foreclosure filing, and Illinois (one in every 552 units.), Utah, South Carolina, Delaware, Connecticut, and Georgia. Miami, Tampa, Chicago, Baltimore and Riverside-San Bernardino, were the metropolitan areas among the country's 20 largest with the highest foreclosure rates.