Foreclosures ease; loan modifications still lag

Foreclosure filings dropped slightly in August, but still remained near record levels, according to figures released this morning by the foreclosure tracking firm RealtyTrac.

A total of 358,471 U.S. residential properties received at least one foreclosure filing in August, or one in every 357 homes. That's down less than 1 percent from July's record level, but still an increase of 18 percent over the August 2008 rate. Foreclosure filings include notices of default, scheduled auctions and bank repossessions.

The number of properties actually repossessed declined 13 percent in August, but notices of default and scheduled foreclosure auctions both set new records that month, indicating that an ample supply of properties will continue to fill the foreclosure pipeline.

Six states account for three-fifths of foreclosures

Nevada continued to have the nation's highest foreclosure rate despite an 8 percent decrease in foreclosure filings from the previous month, with one home in 62 receiving a foreclosure notice. Florida and California had the number two and three spots, with one home in 140 and one in 144 receiving foreclosure filings, respectively. Those states, along with Arizona, Michigan and Illinois, accounted for more than 60 percent of all U.S. foreclosure activity, despite declining numbers of repossessed properties in all six states.

Meanwhile, efforts to modify mortgages for at-risk homeowners continue to struggle, although the government reports its Making Home Affordable program is on track to reach its goal of modifying half a million mortgage loans by November.

The monthly Servicer Performance Report released by the Treasury Department on Wednesday shows that 360,000 trial loan modifications have begun under the Making Home Affordable program, with 570,000 loan modifications offered. Under the program, borrowers must maintain a modified payment schedule for three months before their trial modification is made permanent.

Few delinquent borrowers obtaining loan modifications

Although it appears likely the program will reach the half million mark by November, the percentage of borrowers actually receiving assistance remains low. Only 12 percent of potentially eligible homeowners who are at least 60 days delinquent on their mortgages had begun a trial loan modification as of August, the report said.

Performance by participating loan servicers varied widely. Major lenders GMAC, JP Morgan/Chase and Citibank have initiated trial loan modifications for approximately one-quarter of their borrowers who are delinquent by 60 days or more. Comparable figures for other major lenders are Wells Fargo, trial modifications initiated for 11 percent of delinquent borrowers; Bank of America, 7 percent; National City, 3 percent; and Wachovia, 2 percent.

The highest performance rate was Saxon Mortgages Services, Inc., which has begun trial modifications for 39 percent of its approximately 74,000 delinquent borrowers. By contrast, Home Loan Services, Inc., has authorized no trial loan modifications, despite having 38,500 delinquent borrowers and agreeing to participate in the program back in April. A number of smaller lenders also have authorized zero loan modifications despite signing up to participate in the voluntary program.

More than 45 loan servicers have signed up to participate in the program, representing 85 percent of the nation's outstanding home mortgages.