Paperwork Issues Still Stall Foreclosures
Despite the fact that banks claim they are ramping up repossessions again and refiling foreclosure documents, the numbers don't appear to prove that. Foreclosure filings fell 14 percent in February month to month and fell 27 percent year over year. That is the largest annual drop since RealtyTrac began running the numbers in 2005.
“Foreclosure activity dropped to a 36-month low in February as allegations of improper foreclosure processing continued to dog the mortgage servicing industry and disrupt court dockets,” said James J. Saccacio, chief executive officer of RealtyTrac.
“While a small part of February’s decrease can be attributed to it being a short month and bad weather, the bottom line is that the industry is in the midst of a major overhaul that has severely restricted its capacity to process foreclosures. We expect to see the numbers bounce back, but that will likely take several months. And monthly volume may never return to its peak in March 2010 of more than 367,000 properties receiving foreclosure filings.”
To prove the point, in this month's report RealtyTrac broke out the numbers by judicial foreclosure states (where foreclosure documents are filed in court before a judge) and non-judicial foreclosure states; the former are where the banks froze most actions, but they are also slowing the process and going over procedures in non-judicial foreclosure states as well.
Notices of default, the first step in the foreclosure process were down 19 percent in judicial states in February and up 13 percent in non-judicial states. Bank repossessions, the final stage, were down 24 percent in judicial states and down 14 percent in non-judicial states.
The numbers are even more stark when you look at specific cities. I asked RealtyTrac for some specific data on that and they told me Miami ranked number seven in the top foreclosure rates in Q3 of last year. In Q1 of this year, it ranks number 41. Florida is a judicial foreclosure state. On the other hand, Los Angeles ranked 40th in foreclosure rates in Q3 of '10 and now ranks 24th in Q1 of this year. California is a non-judicial foreclosure state.
While an improving job market appears to be helping avert foreclosures, increasing negative equity is doing just the opposite; unfortunately, thanks to paperwork and judicial issues, at this point it is impossible to know which is prevailing.
RealtyTrac experts claim the foreclosure numbers have yet to show the final surge. While new defaults are falling, the pipeline is now so large that the numbers have nowhere to go but up.