Foreclosure Activity Drops Sharply In April

Foreclosure filings — default notices, scheduled auctions and bank repossessions — fell nine percent from March and were down 34 percent from April 2010, according to RealtyTrac, a foreclosure marketing firm.

But that doesn't mean the housing market is recovering or that fewer homeowners are in trouble. Other evidence suggests otherwise. Instead, says RealtryTrac, it means the process has simply slowed down.

“Foreclosure activity decreased on an annual basis for the seventh straight month in April, bringing foreclosure activity to a 40-month low,” said James J. Saccacio, chief executive officer of RealtyTrac. “This slowdown continues to be largely the result of massive delays in processing foreclosures rather than the result of a housing recovery that is lifting people out of foreclosure.”

Delays

The first delay occurs between delinquency and foreclosure, when lenders and services are no longer automatically pushing loans that are more than 90 days delinquent into foreclosure but are waiting longer to allow for loan modifications, short sales and possibly other disposition alternatives. Data from the Mortgage Bankers Association shows that about 3.7 million properties are in this seriously delinquent stage.

The second delay occurs after foreclosure has started, when lenders are taking much longer than they were just a few years ago to complete the foreclosure process. According to RealtyTrac, foreclosure actions were reported on 219,258 U.S. properties in April, with one in every 593 U.S. housing units receiving a foreclosure filing during April.

In 2007, it took an average of only 151 days for a foreclosure process to be completed and a repossessed home to be placed back on the market. In April, the average time lengthened to 400 days.

Mortgage servicers have slowed the process in the wake of last year's “robo-signing” scandal, when several big firms were caught taking illegal short-cuts. Not only are they now being more deliberate, they are slowing the number of distressed properties coming on the market, which may prove to be helpful in stabilizing the housing market.

Nevada, Arizona, California still the hardest hit

Though the process has slowed, the states with the highest number of foreclosures remains pretty much the same. Nevada posted the nation’s highest state foreclosure rate for the 52nd straight month in April, with one in every 97 housing units receiving a foreclosure filing during the month. Overall foreclosure activity in Nevada decreased nine percent from the previous month and was down 27 percent from April 2010.

Arizona repossessions decreased three percent from March but were still up 22 percent from April 2010, helping the state maintain the nation’s second highest foreclosure rate for the fifth consecutive month. One in every 205 Arizona housing units received a foreclosure filing during the month, and overall foreclosure activity decreased 15 percent from March and was down 17 percent from April 2010 despite the year-over-year jump in REOs.

Overall, foreclosure activity in California was down monthly and annually in April, but a 22 percent month-over-month jump in REOs helped keep the state’s foreclosure rate at the third highest among all states for the sixth consecutive month. One in every 240 California properties received a foreclosure filing in April.