Foreclosure activity dropped significantly again in July according to figures released on Thursday by RealtyTrac, however the Irvine California firm states that this is not as much a sign of economic improvement as it is an indication of a growing problem.
Foreclosure filings were reported on 212,764 U.S. properties in July, one in every 611 housing units. This is a decrease of 4 percent from the June figures and a drop of 35 percent from July 2010. However, according to RealtyTrac CEO James J. Saccacio, "Unfortunately, the falloff in foreclosures is not based on a robust recovery in the housing market but on short-term interventions and delays that will extend the current housing market woes into 2012 and beyond. A stabilizing economy and improving job market are the long-term keys to a housing market recovery."
The foreclosure information is contained in its regular U.S. Foreclosure Market Report, in which RealtyTrac relies on a database derived from a nationwide survey of foreclosure filings in three categories:
- 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.
- 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.
- 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 all three categories were down from the previous month and the same period a year earlier. Notices of Default and LIS were filed for the first time on a total of 59,516 properties, down 7 percent from June and a 39 percent decline from June 2010. Default notices have declined 58 percent since hitting a monthly peak of 142,064 in April 2009.
Foreclosure auctions were scheduled for 85,419 homes, a 36 month low. The figure was down 5 percent from June and a year-over-year decrease of 37 percent. Foreclosures were completed on 67,829 properties (REO), down one percent in a month and 27 percent lower than the previous June. REOs were 34 percent below the peak in repossessions (102,134) in September 2010, just before the robo-signing controversy sparked nationwide foreclosure moratoria.
"July foreclosure activity dropped 35 percent from a year ago, marking the 10th straight month of year-over-year decreases in foreclosure activity and the lowest monthly total since November 2007," Saccacio said. "This string of decreases was initially triggered by the robo-signing controversy back in October 2010, which forced lenders to substantially slow the pace of foreclosing, but the downward trend in foreclosure activity has now taken on a life of its own. It appears that the foreclosure processing delays, combined with the smorgasbord of national and state-level foreclosure prevention efforts - including loan modifications, lender-borrower mediations and mortgage payment assistance for the unemployed - may be allowing more distressed homeowners to stave off foreclosure.
While Saccacio is correct that movement through the foreclosure pipeline has slowed dramatically and the backlog serious delinquencies and shadow inventory of REO are growing, every foreclosure report issued in the last few months regardless of its source, has shown a steady decline of delinquencies, and defaults, and thus fewer homeowners entering that pipeline.
Nevada continues to hold on to first place among states suffering the highest levels of foreclosure filings. A total of 9,930 properties received a filing in July, one in every 115 housing units. This is, however, a 1 percent month-over-month decrease and a 28 percent drop year-over year. This is the 55th straight month Nevada has led the nation in the ratio of filings.
California and Arizona had the second and third highest rates. California logged 56,193 filings, one in every 239 housing units, a 4 percent decrease since June and a 16 percent drop since June 2010. Arizona, which spent the seven previous months in second place, dropped a spot after a 25 percent reduction in filings since June. There were 10,098 filings, one in every 273 housing units a 39 percent decrease in one year.
Other states with foreclosure rates ranking among the top 10 were Georgia, Utah, Florida, Michigan, Idaho, Illinois and Wisconsin.
Foreclosure activity continues to be relatively localized; ten states account for 73 percent of all foreclosures filed. California's total of 56,193 was the highest number reported by any state followed by Florida with 22,377 (but still a 57 percent drop from June 2010), Georgia (11,461), Michigan (10,894), and Illinois (10,571). Georgia and Illinois numbers were driven by large increases in REO activity; 25 percent and 16 percent respectively.
