IBJNews

National, state foreclosure starts on the rise

Back to TopCommentsE-mailPrintBookmark and Share

More U.S. homes started on the foreclosure path in July, as lenders tackled a backlog of unpaid mortgages even as they pulled back on home repossession.

The number of homes that received an initial notice of default — the first step in the foreclosure process — increased 6 percent in July compared to the same month last year, foreclosure listing firm RealtyTrac Inc. said Thursday.

States with increases in foreclosure starts were led by Connecticut, where they tripled, followed by New Jersey and Pennsylvania, where initial notices more than doubled, RealtyTrac said. They rose 83 percent in Indiana and 65 percent in Massachusetts.

Filings of initial default notices have increased on an annual basis for three months in a row.

The trend comes as banks work to make up for time lost last year as the mortgage-lending industry grappled with allegations that it had processed foreclosures without verifying documents.

The nation's biggest mortgage lenders reached a $25 billion settlement in February with state officials. That cleared the way for banks to address their backlog of unpaid mortgages.

On average, 104,000 homes have entered the foreclosure process each month going back to May. That's well below the 178,000 per-month average in 2009, the year with the highest monthly average, RealtyTrac said.

The increase in homes entering the foreclosure process raises the possibility that more properties could end up being foreclosed upon in coming months. But of late, banks have been dialing back home repossessions and increasingly allowing the borrower to sell the home in a short sale. That's when the bank agrees to accept less than what the seller owes on the mortgage.

Banks took back 21 percent fewer homes last month than in July last year, RealtyTrac said. Repossessions were down 1 percent from June. They've been down on an annual basis every month going back nearly two years.

"Lenders are much less likely now than they were even a year ago or two years ago to repossess a property after they've started the foreclosure process," said Daren Blomquist, a vice president at RealtyTrac.

Completing the foreclosure process can potentially open banks up to liability if they're accused of improper procedures. And short sales, on average, sell for $25,000 more than a bank-owned property, Blomquist said.

As a result, lenders are much more likely to look for alternatives, such as a short sale, a loan modification or refinancing.

So far this year, home repossessions have averaged about 57,000 a month. That puts the nation on track for just under 700,000 completed foreclosures this year, below the 800,000 recorded in 2011.

The latest crop of homes entering the foreclosure process does not signal that there is a fresh wave of homeowners in distress and missing payments. The majority of the loans entering the foreclosure process are mortgages that date back to the housing bubble years, Blomquist said.

Even so, the increase in foreclosure-starts could boost the number of homes that end up on the market for sale at a sharp discount to other properties. That means, barring another outcome, many of the homes that entered the foreclosure pipeline in recent months could end up weighing down the values of nearby homes when they hit the market.

A stronger housing market could mitigate the impact of future foreclosures on home prices, and home sales are expected to end up ahead of last year. But many economists still say the market is years away from a full recovery.

The number of homes receiving foreclosure-related notices last month increased generally in states where the courts play a role in the foreclosure process. Among them: New Jersey, Florida, Ohio and Illinois.

Many homes on the foreclosure path were left in limbo in those states last year, while mortgage lenders sorted out the foreclosure abuse allegations.
In contrast, foreclosure activity was down sharply in Arizona and California — foreclosure hotbeds throughout the housing downturn, but states where the court does not factor into the foreclosure process.

That didn't keep California from posting the nation's highest foreclosure rate last month. One in every 325 households reported a foreclosure-related notice in July, more than twice the national average.

In Indiana, one in every 665 housing units received a foreclosure filing in July. Among counties, Marion County had the highest rate in the state with one foreclosure filing for every 271 housing units.
 

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
 
Subscribe to IBJ
  1. I am also a "vet" of several Cirque shows and this one left me flat. It didn't have the amount of acrobatic stunts as the others that I have seen. I am still glad that I went to it and look forward to the next one but I put Varekai as my least favorite.

  2. Looking at the two companies - in spite of their relative size to one another -- Ricker's image is (by all accounts) pretty solid and reputable. Their locations are clean, employees are friendly and the products they offer are reasonably priced. By contrast, BP locations are all over the place and their reputation is poor, especially when you consider this is the same "company" whose disastrous oil spill and their response was nothing short of irresponsible should tell you a lot. The fact you also have people who are experienced in franchising saying their system/strategy is flawed is a good indication that another "spill" has occurred and it's the AM-PM/Ricker's customers/company that are having to deal with it.

  3. Daniel Lilly - Glad to hear about your points and miles. Enjoy Wisconsin and Illinois. You don't care one whit about financial discipline, which is why you will blast the "GOP". Classic liberalism.

  4. Isn't the real reason the terrain? The planners under-estimated the undulating terrain, sink holes, karst features, etc. This portion of the route was flawed from the beginning.

  5. You thought no Indy was bad, how's no fans working out for you? THe IRl No direct competition and still no fans. Hey George Family, spend another billion dollars, that will fix it.

ADVERTISEMENT