RealtyTrac reported this morning that foreclosure activity rose 3 percent in January as several states posted spikes in one or more steps in the process.  Foreclosure filings were reported on a total of 210,941 U.S. properties or one in every 624 housing units during the month, however, even with the month-over-month increase in filings overall activity was 19 percent below that in January 2010. 

RealtyTrac, an Irvine California company, compiles a U.S. Foreclosure Market Report^TM each month by tracking documents filed in the three stages of foreclosure:

1.  Notice of Default (NOD) and Lis Pendens (LIS). This is the first legal notification from a lender that the borrower on a mortgage loan has defaulted under the terms of their mortgage and the lender intends to foreclose unless the loan is brought current.

2.  Auction - Notice of Trustee Sale and Notice of Foreclosure Sale (NTS and NFS): if the borrower does not catch up on their payments the lender will file a notice of sale (the lender intends to sell the property). This notice is published in local paper and contains information pertaining to the date, time and subject property address.

3.  Real Estate Owned or REO properties : "REO" stands for "real estate owned" and typically refers to the inventory of real estate that banks and mortgage companies have foreclosed on and subsequently purchased through the foreclosure auction if there was no offer higher than the minimum bid.

Filings in two of the three categories above rose during the month and the third, default notices were unchanged from the previous month with 58,362 filings.  This was 22 percent less than one year earlier.  Foreclosure auctions were scheduled on 86,037 properties in January, an increase of 1 percent from December but down 20 percent from a year earlier. The numbers of properties taken into bank inventory by lenders (REO) jumped 8 percent to 66,542 properties but this was still 15 percent fewer than in January 2011.

Brandon Moore, CEO of RealtyTrac said of the numbers, "Although overall foreclosure activity was down from a year ago for the 16^th straight month in January, we continue to see signs on a local and regional level that the frozen-up foreclosure process is beginning to thaw."  He noted the increase of activity on an annual basis in several states which he said followed a pattern that started in late 2011. 

"We expect the pattern of increasing foreclosures to continue in the coming months," Moore said, "especially given the finalized mortgage and foreclosure settlement reached in early February between 49 state attorneys general and five of the nation's largest lenders. 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. Other roadblocks to foreclosure are still in place at the state level, however, including legislation altering the foreclosure process and lawsuits against lenders. We expect to see somewhat uneven trends in local and regional foreclosure numbers going forward as lenders work through these additional legislative and legal roadblocks." 

Several states saw an increase or more than 20 percent in default notices compared to one year earlier, with huge increases in Maryland (100 percent) and Pennsylvania (112 percent). Other states with big increases were Florida (36 percent), Massachusetts (27 percent), and Connecticut (23 percent). 

States with big increases in scheduled auctions included Illinois and Indiana which were both up 141 percent on an annual basis, South Carolina (79 percent), Massachusetts (57 percent) and Minnesota (24 percent).  REO activity jumped in Massachusetts, up 75 percent, New Hampshire (62 percent), Indiana (60 percent), and Illinois (52 percent). 

It is difficult to draw conclusions about the state level figures however, because in some cases the base was relatively small.   Massachusetts, for example, saw big increases in all three categories of filings but even after the increases foreclosure activity overall was one filing per 1,191 households, about half the national rate.  The big jumps in default notices in Pennsylvania and Maryland were against even smaller existing numbers.  In the case of Illinois, Florida, and a few others of the states above the increases came in states where rates were already devastating, in Illinois, for example, the rate is one filing per 369 households and in Florida one in 363.

The three states that have topped the list of filings for years continue to have problems but are finally improving.   Nevada's filings fell by 52 percent from figures a year earlier and are now at a 52 month low with one in 198 properties affected.  California's activity was also at a multi-year low, down 23 percent from a year earlier.  Still, one in every 265 housing units was subject to a filing during the month.  In Arizona the annual rate was down 44 percent however the state saw an uptick of 14 percent from December.  The rate is Arizona is one in 325 properties.

Even better news; the decreases in all three states were driven by drops in the numbers of default notices - the first step in the foreclosure process.  In Nevada these filings have averaged fewer than 1,200 per month since October compared to more than 4,000 per month in the first nine months of the year and in California default notices were at the rate of 18,000 in December and January compared to an average over 28,000 in the three previous months.  Arizona also saw a big drop in foreclosure starts which averaged 4,300 during the last two months after averaging more than 7,500 in the previous 12 months.

Other states still suffering high foreclosure rates are Georgia (one in 328) and Michigan (one in 354).