More Action Seen on Foreclosures

By:: Peter King | February 16, 2012

Foreclosure activity picked up in January, a possible sign that lenders are gearing up to tackle the backlog of distressed properties that has been a drag on the real estate market.

Total foreclosure filings were up 3 percent for the month, according to figures released today by RealtyTrac. However, the rate of newly initiated foreclosures held steady while bank repossessions – the last stage in the process – were up a full 8 percent from December’s level, to a total of 66,500 properties.

Movement seen on delayed foreclosures

“Although overall foreclosure activity was down from a year ago … we continue to see signs on a local and regional level that the frozen-up foreclosure process is beginning to thaw,” said Brandon Moore, RealtyTrac CEO. He noted that foreclosures have recently begun trending upward on a year-over-year basis in a number of states, including California, Florida, Arizona and Illinois.

“We expect the pattern of increasing foreclosures to continue in the coming months, especially given the finalized mortgage and foreclosure settlement (reached last week),” Moore continued. “The settlement sets forth clear guidelines for lenders and servicers to follow when foreclosing, which should allow them to push through some of the delayed foreclosures from last year.”

Settlement cleared way for renewed action

Although foreclosure activity has generally been decreasing – on an annual basis, total foreclosure filings have been trending downward the past 16 months – most observers have viewed that as a temporary situation. Lenders put the brakes on foreclosures after the robo-signing scandal broke in the fall of 2010, and have proceeded cautiously since.

With the approval of the mortgage and foreclosure settlement last week, lenders are expected to be more active in tackling the backlog of foreclosures and distressed properties that has been hanging over the market the past few years.

Terminal foreclosure events – scheduled foreclosure auctions and actual bank repossessions – are already up sharply in many states compared to one year ago. Compared to January 2010, scheduled foreclosure auctions are up by more than 50 percent in Massachusetts, South Carolina, Illinois and Indiana, the last two showing annual increases of 141 percent.

Bank repossessions, known as REOs (real-estate owned), were also up sharply in many states, with Illinois, Indiana, New Hampshire and Massachusetts all showing annual increases of greater than 50 percent.

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