Foreclosures Fall In February

Foreclosure filings, which include everything from default notices to bank repossessions, dropped 14 percent last month, according to RealtyTrac, an online foreclosure marketer.

The question is why.

It would be good news if foreclosure activity suddenly dropped because homeowners are now better able to keep up with their mortgage payments. However, that doesn't appear to be the reason.

"While a small part of February's decrease can be attributed to it being a short month and bad weather, the bottom line is that the industry is in the midst of a major overhaul that has severely restricted its capacity to process foreclosures," said James J. Saccacio, chief executive officer of RealtyTrac. "We expect to see the numbers bounce back, but that will likely take several months. And monthly volume may never return to its peak in March 2010 of more than 367,000 properties receiving foreclosure filings."

Retooling the foreclosure process

The mortgage servicing industry slammed on the brakes late last year, retooling its foreclosure process in the wake of revelations of "robo-signing" of documents and other short cuts not allowed by law. A lot of homeowners may, indeed, be in default, but the loan servicer doesn't feel ready to move against them. Meanwhile, they are falling further behind as interest and late fees pile up.

A total of 63,165 properties received default notices  for the first time in February, a 16 percent decrease from the previous month and a 41 percent decrease from February 2010. Default notices hit a 48-month low in February and were 55 percent below a peak of 142,064 in April 2009.

But in states with a judicial foreclosure process, which expressly forbids "robo-signing," default notices decreased 19 percent from January and were down 48 percent from February 2010.

In February, more than 97,000 properties went up for auction for the first time, a 10 percent drop from January.

Nevada holds dubious distinction

Once again, Nevada had the highest foreclosure rate of any state. It's headed the list for 50 straight months and shows no signing of giving up the top spot. One in every 119 Nevada housing units had a foreclosure filing last month.

Arizona was second with one in 178 housing units getting a foreclosure notice. California was third, with one in 239 units.

In fact, 10 of the 50 states account for more than 70 percent of all the foreclosure filings. Other hard hit states include Florida, Michigan, Ohio, Texas, Georgia, Illinois and Wisconsin.