Foreclosure Activity Falls 'Artificially' Due to Moratorium

Foreclosure activity fell in October due to the so-called "robo-signing" scandal that caused large mortgage lenders to put a temporary freeze on foreclosures, according to a report released Thursday by RealtyTrac.

Paul J. Richards | AFP | Getty Images

Foreclosure activity was down 4.39 percent in October from the previous month, but was practically flat (down just 0.04 percent) from the previous year, according to the report.

"The drop is probably artificial,” said Rick Sharga, senior vice president of foreclosure data web site RealtyTrac. "Unemployment is still high. None of things that would lead to a recovery have come to the forefront."

"By the time we get to the first of the year we’ll probably see numbers escalate again," he added.

In all, 332,172 properties were in the foreclosure process in October. One in 389 U.S. households received a foreclosure notice in October. (Foreclosure notices are defined as a default notice, auction sale notice or bank repossession.)

In October, major mortgage lenders such as Bank of America , GMAC, JP Morgan and PNC voluntarily halted foreclosure activity in some states, if not all 50, as they reviewed their foreclosure process after it was uncovered that some banks may have used false signatures and documents to justify foreclosures. Most have announced that they have resumed foreclosures or plan to do so shortly. (Read: A Primer On The Foreclosure Crisis.)

RealtyTrac expects foreclosure numbers in November to also be artificially lower than it would have been, and for the numbers to increase again in the beginning of 2011.

After hitting a record in September, bank repossessions—the final step in the foreclosure process—dropped 9 percent to 93,236 in October. Repossessions surpassed 100,000 for the first time in September. Although they were down on a month-to-month basis in October, they were still 21 percent higher than in October 2009.

The ten states with the highest foreclosure rates showed little changed from the previous month. Nevada again had the highest foreclosure rate in the country with one in every 79 properties in the state getting a foreclosure notice. The state also reported its first year-over-year increase in foreclosure activity since September 2009.

In total, 14,205 properties in the state received a foreclosure notice, up 3 percent from a year ago, but down 13 percent from a month ago. (Nevada also has the highest unemployment in the country.)

Florida ranked second with one in every 155 households receiving a notice, followed by Arizona (one in 165 households), California (one in 201 households) and Michigan (one in every 235 households.) (See the full list in our slideshow.)

Vermont had the lowest rate, with one in every 14,210 properties receiving a foreclosure notice.

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  • Diana Olick

    Diana Olick serves as CNBC's real estate correspondent as well as the editor of the Realty Check section on CNBC.com.

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