Foreclosure slowdown deepens, continues to stall housing recovery

January 22, 2012 | Comments Off on Foreclosure slowdown deepens, continues to stall housing recovery


Thousands of delinquent loans are waiting to be foreclosed upon, but processing has slowed to a crawl because of tighter standards.

By Melinda Fulmer of MSN Real Estate

The number of properties entering some stage of the foreclosure process declined 32% in the second quarter from the same time last year, marking a new post-bubble low in foreclosure-processing activity, a trend that could further forestall a housing recovery.

Foreclosure filings were reported on 608,235 U.S. properties in the second quarter, an 11% decline from the first quarter of 2011, according to foreclosure-data firm RealtyTrac.

The quarterly drop was not a result of improving economic conditions, a surge in loan modifications or an improving housing market. Instead, it was the result of a big slowdown in the processing of filings in the wake of the robo-signing scandal, says Rick Sharga, RealtyTrac senior vice president.  

“A lot of the processing is on hold or has dramatically slowed down while the industry finishes up the settlement negotiation with the attorney generals and federal government,” Sharga says.

“Thousands and thousands” of delinquent loans are ready to be foreclosed upon, but are being held to ensure they meet standards, Sharga says.

Foreclosure filings did tick up slightly in the last month of the quarter: June’s 222,740 filings represented a 4% increase from May. However, they were still 29% below June of last year. Sharga says it’s too soon to tell if this monthly pickup is the start of a trend.

Foreclosure leaders
Nevada posted the highest foreclosure rate, with one in every 39 homes receiving a foreclosure filing in the second quarter. The 29,110 filings recorded in the quarter represented a 9% decrease from the previous quarter, and a 29% decline from the same time last year.

Arizona had the second-highest foreclosure rate, with one in every 70 homes receiving a filing in the quarter. The 39,410 filings represented a 14% decline from the previous quarter and a 14% decline from the second quarter of 2010.

California was third, with one in every 92 homes receiving a foreclosure filing in the quarter. The 146,026 filings were by far the highest total in the U.S. Filings were down 13% from the previous quarter and 24% from the same period last year.

Other states with foreclosure rates among the 10 highest were: Utah, Georgia, Idaho, Michigan, Florida, Colorado and Illinois.

For all of the properties in the foreclosure pipeline, there are not so many to be found for buyers right now, agents say. Asset managers are holding back these properties from the market as demand for housing has softened.

“It’s hard to find a bank-owned home for my clients,” says Kim Drusch of Century 21 Award in San Diego. Those making it to the market are quickly being scooped up by investors with cash.

However, many more are coming in the years ahead, analysts say.

About 4 million loans that are seriously delinquent should remain in the foreclosure process for at least three more years, according to LPS Applied Analytics, the data arm of Lender Processing Services, one of the country’s large loan servicers.

“We’ve got a huge population of shadow inventory that will not be turned around in the next year,” says Kyle Lundstedt, Applied Analytics’ managing director. “We’ve got three to five years of this extended new normal.”



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