Foreclosure Exposure Splits the Nation
Anyone who expected to see a big jump in foreclosure numbers—especially since banks are supposedly ramping up the process after the "robosigning" faulty paperwork scandal—got a big surprise today.
Total foreclosure activity increased a mere one percentin January month-to-month, according to RealtyTrac.
More importantly, the final stage of foreclosure, bank repossessions (where most of the robo-issues allegedly lie) actually fell 11 percent in judicial foreclosure states and rose 23 percent in non-judicial states. Judicial foreclosure states require the loan paperwork to be filed in court for a judge's ruling; non-judicial states simply require the foreclosure paperwork to be filed with the county records. There are 23 judicial foreclosure states. Clearly the servicers aren't ramping up as we thought.
"I think the poster child for everything that’s going wrong with foreclosures right now is probably Florida," notes RealtyTrac's Rick Sharga. "The state's numbers are off 54 percent year-over-year and there's no empirical data that suggest that the market conditions have improved even a little bit, much less 54 percent."
Sharga blames not only a backlog of troubled loans at the banks, but in the courts. They just can't handle the volume. In non-judicial states, the numbers are up, but not as high as you might expect. But wait, there's more.
Notices of Default, the first stage of the foreclosure process, are at their lowest level in years in January, "which indicates servicers are unwilling or unable to start and finish foreclosures on all properties at will, like they used to," says mortgage consultant Mark Hanson.
"More importantly, the drop in NOD and NTS (notice of trustee sale) were 1 percent and 4 percent in January m/m respectively. But because December was a holiday impacted month — with holiday days and moratoriums, January average daily NOD and NTS results were horrific i.e., January had far more days and there were no holiday moratoriums impacting the servicers filing NOD and NTS," Hanson adds.
All of this just means a bigger backlog of distress clogging up the system and weighing on the housing recovery.
"The worst thing that could happen for the housing market in terms of a recovery is that this procedural issue becomes more and more pronounced, and we have a longer drag out of processing foreclosures."
Foreclosed properties are in great demand now, as wary home buyers and thirsty investors look for the best possible deals. If the banks don't serve up the REO's, and organic home prices are still too high for some, well, you do the math.