Foreclosure activity took a nosedive in November, reflecting both an expected seasonal lull and foreclosure moratoriums that were imposed by several of the major servicers.
RealtyTrac reports that foreclosure filings in November dropped 21 percent vs. filings in October. This is a 14 percent decline from November 2009. A total of 262,339 U.S. properties, one in every 492 housing units, were the subject of a foreclosure filing during the month. Both the 21 percent month-over-month decrease and 14 percent year-over-year decrease in foreclosure activity were the largest drop offs recorded since RealtyTrac began publishing its figures in January 2005.
RealtyTrac, an Irvine California company, compiles a U.S. Foreclosure Market Report each month by tracking documents filed in all three stages 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.
Several servicers stopped foreclosures in early October when they discovered that inappropriate procedures were being used in some states with the judicial form of foreclosure which requires court approval. The problems involved so-called robo-signing, the mass processing of required affidavits without check for proper underlying documentation. Only 23 states were initially involved but some servicers ultimately stopped the process nationwide. In most cases this directly affected the later stages of foreclosure, but filings in November were down across the board.
In the earliest stage of the foreclosure process, initial default notices - NOD or LIS - were filed on a total of 78,955 properties. This was a decrease of 21 percent from October and 31 percent less than the level one year earlier. November was the 10th straight month that the numbers of default notices has fallen and the total was the lowest since July 2007. In judicial foreclosure states default notices were 31 percent lower than in October and 43 percent below levels a year earlier. In non-judicial states the decreases were 9 and 12 percent respectively.
Auctions were scheduled for the first time on 115,956 properties, down 16 percent from October and unchanged from one year earlier. In judicial states there were 34 percent fewer auctions scheduled than in the previous month and 12 percent less than one year earlier. In non-judicial states there was a month-to-month drop of 7 percent but scheduled auctions were up 5 percent since November 2009.
Actual foreclosures were conducted on 67,428 properties, the fewest since May 2009. This was 28 percent below the October level and 12 percent fewer than in November 2009. Foreclosures this year already total 980,000, above the record high 2009 total.
"Foreclosure activity decreased dramatically in November, with fewer than 300,000 properties receiving a foreclosure notice for the first time since February 2009," said James J. Saccacio, chief executive officer at RealtyTrac. "While part of the decrease can be attributed to a seasonal drop of 7 to 10 percent that typically occurs in November, fallout from the foreclosure robo-signing controversy forced lenders and servicers to hit the pause button on many foreclosures while they scrambled to revamp their internal procedures and revise or resubmit questionable paperwork."
As usual, Nevada had the highest foreclosure rate in the country. Activity decreased 20 percent during the month (Nevada is a non-judicial state) but one in every 99 housing units in the state received a foreclosure filing during the month. This is the 47th straight month that Nevada has led the nation in foreclosure activity.
Arizona, Florida, California, and Michigan which have also been among the top five states in foreclosure activity for many months all dropped from October totals while Utah, a state where both forms of foreclosure are used, jumped from sixth ranked to second in a month with an increase in filings of over 17 percent. One of every 221 housing units in the state received a foreclosure filing in November.
California, another non-judicial state, had a decrease of 14 percent from October and was down 22 percent from the year before but still ranked third nationwide with one in every 233 houses receiving a filing. California, with 57,378 filings, accounted for 22 percent of the total filings in the nation.
Activity in Arizona where both judicial and non-judicial foreclosures are used decreased dramatically in November. Filings were down 37 percent from October levels and 28 percent year-over-year. The state long ranked second or third, is now fourth with filings on one in every 262 households.
The remaining states in the top ten in foreclosure activity were Florida, Georgia, Michigan, Idaho, Illinois, and Colorado.