US Mortgage Default Notices Jump in August: RealtyTrac

Default notices on U.S. homes notched their biggest monthly increase in four years in August, though overall foreclosure activity was down compared with a year ago, a report by RealtyTrac said on Thursday.

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First-time default notices were filed on 78,880 homes last month, marking a nine-month high and up 33 percent from July. It was the biggest increase since August 2007.

Even so, notices were down 18 percent from the same month last year and were down 44 percent from the monthly peak reached in April 2009 during the tail end of the recession .

The rise in default filings did not suggest that a new foreclosure problem was on the horizon, but that some of the backlog related to documentation problems was being worked out of the system, said Rick Sharga, senior vice president at RealtyTrac.

Foreclosure activity was halted temporarily late last year due to claims that lenders relied on "robo-signing," where documents were signed without reviewing the case files.

"There are probably about 3.5 million loans that should be in foreclosure but aren't yet, and we're going to have to work through that inventory before the housing market can come back," said Sharga. "This is a painful but necessary first step to get the housing market back on a more even keel."

Total foreclosure filings—which include default notices, scheduled auctions and repossessions—were sent to 228,098 homes, a 7 percent increase from July but down 33 percent from August 2010.

Bank repossessions fell 4 percent to a six-month low of 64,813 homes. Repossessions have come down 37 percent from the peak of 102,134 hit in September 2010.

Nevada once again had the highest state foreclosure rate with one in every 118 homes receiving a foreclosure filing in August. Nevada has held the top spot for over four years.

Even so, Nevada saw a 3 percent decrease in filings as scheduled auctions and bank seizures eased.