The numbers represent the biggest month-over-month increase since August 2007.
“The big increase in new foreclosure actions may be a signal that lenders are starting to push through some of the foreclosures delayed by ‘robo-signing’ and other documentation problems,” RealtyTrac chief executive James Saccacio said in a statement. “It also foreshadows more bank repossessions in the coming months as these new foreclosures make their way through the process.”
Last September, several major banks, including Bank of America, halted new foreclosures after rampant problems with their legal paperwork throughout the country came to light, prompting questions about who exactly owned the properties being foreclosed upon. Much of the controversy centered on robosigning, in which employees signed someone else’s name on thousands of affidavits or did not verify the facts they were attesting to.
That scandal prompted state and federal investigations and embroiled some of the country’s largest banks in multibillion-dollar settlement negotiations that have yet to be resolved. More homeowners facing foreclosure have challenged the legitimacy of the cases against them, and some judges have focused increased scrutiny upon foreclosure filings. In addition, some states have put in place new requirements that have slowed the foreclosure process further.
Backlogs
Those changes have left many states wrestling with lengthy foreclosure backlogs that have taken a painfully long time to work through. In early 2007, it took less than six months on average to complete a foreclosure proceeding in Florida. Four years later, that average has grown to more than 600 days. In New York, it takes more than 900 days to foreclose, on average. Foreclosure timelines also have grown in Maryland and Virginia, though less drastically.
Meanwhile, the amount of unsold properties is weighing on the real estate market. Altogether, banks and mortgage lenders hold about 800,000 foreclosed homes, according to RealtyTrac. That’s fewer than a few months ago but still an inventory that could take years to clear.
The increase in foreclosure actions during August still did not match the furious pace at which banks were foreclosing a year earlier, before the slowdown. The nearly 80,000 default notices filed in August also fell far short of the peak of 142,000 in April 2009.
But if the uptick in foreclosure filings continues, it would mark the first significant push to foreclose on delinquent borrowers in nearly a year. Five states accounted for more than half the foreclosure activity in August — California, Florida, Michigan, Illinois and Georgia. Nevada continued to have the nation’s highest foreclosure rate.
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