Foreclosure Filings Drop in Wake of Robo-Signing Scandal

By:
Peter King | November 12, 2010

U.S. foreclosure filings fell by nearly 4½ percent in October, with a 9 percent drop in bank repossessions, as lenders sought to untangle the mess created by the recent “robo-signing” controversy. 

A total of 322,000 U.S. properties were subjected to various foreclosure actions in October, down from nearly 347,000 in September, according to figures released today by the foreclosure data firm RealtyTrac. The figure includes 93,000 bank repossessions, known in the industry as REOs, down from a record 102,000 reported in September.
 
 “October marks the 20th consecutive month where over 300,000 U.S. homeowners received a foreclosure notice,” said James J. Saccacio, chief executive officer at RealtyTrac. “The numbers probably would have been higher except for the fallout from the recent 'robo-signing' controversy — which is the most likely reason for the 9 percent monthly drop in REOs we saw from September to October and which may result in further decreases in November."
 
Mortgage servicers have recently been focused on correcting the documentation problems that led to the controversy and triggered an investigation by all 50 state attorneys general. Although that’s caused some delays in processing ongoing foreclosures, it’s hard to say just how much of October’s decline is due to those delays.
 

Defaults down 19 percent from last year

 
New default notices also were down in October, declining by 2 percent to approximately 100,000 homes, a 19 percent below the October 2009 level. It was the ninth consecutive month that new defaults declined on an annual basis, suggesting that fewer homeowners are finding themselves in financial trouble.
 
Scheduled foreclosure auctions also declined, by 3 percent from September, to 138,000 properties.
 
The 322,000 total foreclosure filings, which consist of defaults, auctions and repossessions,was about the same as in Oct. 2009. However, while defaults were down from one year ago, bank repossessions were up sharply, with a lesser increase in scheduled auctions, as lenders work through a backlog of bad mortgages. Bank repossessions showed an annual increase of 21 percent, while scheduled auctions were up 6 percent from one year ago.
 
The robo-signing controversy erupted in late September, as it became apparent that at least some large lenders had been cutting legal corners when documenting claims in foreclosure cases. Specifically, it was revealed that lender representatives were signing off on tens of thousands of sworn affidavits without reading them or personally verifying their accuracy, as the law requires, or were having them improperly notarized.
 
Several large lenders, including GMAC, Bank of America and JP Morgan Chase, briefly halted foreclosure actions in October in order to check into possible documentation issues, but resumed foreclosures shortly thereafter.

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