Delays in foreclosure proceedings and a new push by big banks and servicers to find foreclosure alternatives is drawing a new, albeit still troubling picture of the nation’s real estate market.
New notices of default, the first step toward foreclosure, fell to a level in May not seen since the end of 2006, according to a new report by online foreclosure site RealtyTrac. Bank repossessions, or REO, the final stage of foreclosure, also fell on a monthly basis for the second straight month. That pushed total foreclosure activity down 33 percent from a year ago.
“I really wish I could say that looking at a 42-month low in foreclosures action means that the housing market is recovering, and the foreclosure problems are all going away and we should all go about our business and be happy,” says RealtyTrac’s Rick Sharga. “Unfortunately, those would all be lies.”
The numbers have been on a roller coaster since the so-called “robo-signing” foreclosure paperwork scandal that unfolded last Fall. Now there are big discrepancies in the numbers state to state, depending on which states practice judicial foreclosures and which don’t. The foreclosure timeline is also increasing as more banks and loan servicers focus on short selling distressed properties, which is when the sale price is less than the value of the mortgage.
REO activity was down 6 percent overall in non-judicial foreclosure states month-to-month, but some non-judicial foreclosure states posted substantial month-over-month increases. Bank repossessions jumped 79 percent in Georgia, 36 percent in Virginia, and 19 percent in Michigan.
In judicial states, bank repossessions actually rose 1 percent month to month, as courts finally begin to get new paperwork and work through lawsuits. In New York, REO activity jumped a whopping 97 percent, and 21 percent in New Jersey.
Foreclosure filings fell 2% in May, compared with April, pushing foreclosure activity down to a 42-month low, according to RealtyTrac’s monthly foreclosure market report, released on Thursday.
Filings were reported on 214,927 properties last month, an amount that’s down 33% compared with May 2010, the firm reported. Filings include default notices, scheduled auctions and bank repossessions.
But the problems and delays in processing foreclosures continued to mask the true foreclosure picture, said James J. Saccacio, chief executive officer of RealtyTrac, an online marketplace for foreclosure properties. The May numbers provided some clues of “what lies behind that mask.”