On the surface, the foreclosure crisis seems to be easing. The number of foreclosure notices filed during the first three months of 2011 fell 27% compared with the first quarter of 2010, according to a report from RealtyTrac released Thursday.
Only 681,000 properties got hit with some type of filing — a notice of default, a scheduled auction or a foreclosure sale — during the quarter, one for every 191 households.
There were 215,046 borrowers who lost their homes, down 17% year-over-year.
“The nation’s housing market continued to languish in the first quarter, even as foreclosure activity fell to a three-year low,” said James Saccacio, RealtyTrac’s CEO.
The explanation for this contradiction is that the foreclosure improvement has been artificial, fueled by banks reacting to paperwork processing issues — the infamous “robo-signing” scandal — by cutting back on filings until they can clean up their procedures.
According to RealtyTrac spokesman Rick Sharga, without the cutback there would have been 900,000 filings during the quarter instead of 681,000. There would have been 280,000 to 300,000 bank repossessions instead of 215,000, he added.
RealtyTrac’s March housing study reports a 15% decrease in foreclosure activity between the fourth quarter of 2010 and the first quarter of 2011, as well as a 27% decline compared to the same period a year ago. The online foreclosure property marketplace cites extended processing timelines as the main culprit for the drag.
While the numbers sound encouraging, RealtyTrac Chief Executive Officer James Saccacio said the numbers are artificially manipulated, and the decrease in activity is only temporary.
“The nation’s housing market continued to languish in the first quarter, even as foreclosure activity fell to a three-year low,” Saccacio commented. “Weak demand, declining home prices and the lack of credit availability are weighing heavily on the market, which is still facing the dual threat of a looming shadow inventory of distressed properties and the probability that foreclosure activity will begin to increase again as lenders and servicers gradually work their way through the backlog of thousands of foreclosures that have been delayed due to improperly processed paperwork.”