Foreclosure Filings in Downtrend. Masked Reality?
Could the end be near? There finally appears to be a developing
trend of good news on the foreclosure front as filings of all types declined by
two percent in May. This is now the
eighth straight month that RealtyTrac's U.S. Foreclosure Market Report has
shown a month-over-month drop and May filings were 33 percent lower vs.
May 2010.
Of course, the foreclosures that have
caused such disruption to the market and heartbreak for millions of Americans
are still occurring at levels that were never imagined five years ago, and in
May one in every 605 U.S. housing units received a filing. Still, the data has been pointing for some
months to fewer loans defaulting and what we hopefully are seeing now is the
huge backlog of seriously delinquent loans working their way through the
system.
The
May report shows that 214,927 properties in the U.S. received some type of foreclosure
filing last month compared to 219,258 in April which was itself down 9 percent
from March. RealtyTrac, an Irvine California firm
tracks foreclosure filings in three categories:
- 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.
Notice of Default filings
(NOD, LIS) totaled 58,797 in May, a seven percent decrease from April and down
39 percent from a year earlier. This was
the lowest number of default notices recorded in a single month since December
2006.
Foreclosures
were scheduled (NTS, NFS) for the first time on 89,251 housing units. This was an increase of 3 percent over April
figures following eight straight months of decreases. The May 2011 figure was 33 percent lower than
the number of foreclosures scheduled a year earlier.
Lenders
repossessed 66,879 properties during the month, a 4 percent decrease from April
and the second straight month the number was down. Repossessions (REO) were 29 percent lower than
one year earlier. RealtyTrac noted that,
since the so-called robo-signing controversy erupted last fall, REO activity
has exhibited a rollercoaster pattern with five monthly decreases and three
increases.
"Foreclosure processing delays
continue to mask the true face of the foreclosure situation, although there
were some clues in the May numbers of what lies behind that mask," said James
J. Saccacio, chief executive officer of RealtyTrac. "First, activity spiked in
May for various stages of the foreclosure process in some states, a pattern
that has occurred in several states over the past few months. This pattern
provides evidence that lenders are somewhat unevenly pushing batches of bad
loans through foreclosure as they overhaul their paperwork and documentation
procedures and as they determine that some local markets are able to absorb
more foreclosure inventory.
"Second, while the inventory of
properties in the foreclosure process has declined steadily over the past six
months - thanks in large part to 16 consecutive months of year-over-year
declines in new default notices - the inventory of unsold bank-owned REOs
increased in April and May even as new REO activity slowed in both of those
months," Saccacio continued. "That points to continued weak demand from buyers,
making it tough for lenders to unload their REO inventory. Even at a
significantly lower level than a year ago, the new supply of REOs exceeds the
amount being sold each month."
A total of 141,348 properties
received foreclosure filings in states where lenders primarily use the
non-judicial foreclosure process, nearly two-thirds of the national total.
Overall foreclosure activity in non-judicial foreclosure states was down 3
percent from April and down 25 percent from May 2010. In non-judicial foreclosure states scheduled
auctions increased 2 percent but in California this category was up 16 percent
since April and in Texas, Virginia, and Michigan the increase was 10 percent. REO activity in states that used primarily
the judicial foreclosure process was virtually unchanged while there was a very
high increase in activity in three non-judicial states. In Georgia REO activity increased 79 percent
month-over-month while in Virginia and Michigan the increases were 36 percent
and 19 percent respectively. There were
also spikes in REO activity in four judicial states with New York posting a 97
percent increase, New Jersey 21 percent, Wisconsin 20 percent and Indiana 18
percent.
Once again Nevada and Arizona led
the nation in foreclosure activity followed by California, Michigan, and
Georgia.