Banks ramp up foreclosures months after action against delinquent homeowners slowed

The nation’s banks have ramped up foreclosure actions recently against delinquent homeowners, nearly a year after revelations of fraudulent filings and other questionable documentation practices slowed the number of foreclosures to a trickle, according to new data released Thursday by RealtyTrac.

Across the country, foreclosure filings were up 7 percent in August over the previous month, though some states saw significantly larger jumps. Default notices increased by 55 percent in California, 46 percent in Indiana and 42 percent in New Jersey.

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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.

Daren Blomquist, a RealtyTrac spokesman, said a closer look at the 55 percent jump in default filings in California offers glimpses into why banks are picking up the pace.

For starters, not all banks are ramping up foreclosures again. Bank of America drove much of the increase, with its numbers up 96 percent over the previous month, Blomquist said.

A Bank of America spokesperson said the company has been able to clear some of its foreclosure backlog, primarily in states that do not require a judge’s approval and after exhausting all other options with troubled homeowners.

“The industry has not yet returned to normal or necessary foreclosure activity levels, but progress is certainly being made,” the company said in a statement.

Wells Fargo and J.P. Morgan Chase also posted modest increases, though some other firms foreclosed on fewer properties in August.

Later for longer

In addition, Blomquist said lenders are not following the traditional timeline of pursuing a foreclosure after a borrower falls 90 days behind. Rather, many of the people who received foreclosure notices in August were delinquent a year or longer on their payments.

“What we’re seeing is lenders pushing through batches of foreclosures as they’re ready to do that,” Blomquist said. “They are making a decision that certain properties are ready to be foreclosed on. . . . It’s not a rigid, standard timeline you would have seen five years ago.”

Blomquist said the jump in foreclosure actions in August is not likely to continue, at least not in a steady way, until banks iron out the problems with their past filings, conclude settlement negotiations with state and federal officials and get a better handle on how costly their mortgage-related legal liabilities will be. Until that happens and the foreclosure backlogs begin to clear, the picture is likely to remain muddled.

“I don’t think you’ll necessarily see this every month. There will be a big surge one month, then a pullback,” Blomquist said. “It’s much more unpredictable.”

 
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