On Wednesday, the leading online marketplace of foreclosure properties, RealtyTrac, revealed that foreclosure filings fell to a 3-year low in the first quarter of 2011. A total of 681,153 properties were slammed with notices of default, auction or repossession in the reported quarter, which marked a drop of 15% from the prior quarter and 27% from the year-ago quarter.
Foreclosures tumbled during the first three months of 2011 as the lenders were facing inquiry for flawed paperwork and faulty procedures. Lenders are currently executing the foreclosure processes quite cautiously and trying to put in place a new system to deal with home loan failures.
According to RealtyTrac’s data, foreclosure decline was higher in the judicial states, where documents need to be filed in the court, as against the non-judicial states, where no such filing is required.
In the first quarter, default notice was given to 197,112 properties, which showed a sequential drop of 17% and a year-over-year decline of 35%. The first quarter 2011 witnessed foreclosure auctions on a total of 268,995 properties, testifying a plunge of 19% from the prior quarter and as much as 27% from the prior-year quarter.
Furthermore, a total 215,046 properties were foreclosed by the lenders in the first quarter. This marks a dip of 6% from the prior quarter and 17% from comparable quarter last year.
According to the report, weak demand, lower home prices and lack of loan availability are taking toll on the housing market. Additionally, although the foreclosures are declining, they will expectedly bounce back once the mortgage servicers get out of the legal hassles.
In September-October last year, JPMorgan Chase & Co. (JPM), Bank of America Corporation (BAC) and Ally Financial Inc. had temporarily suspended foreclosures across the country as a result of the discovery of flaws in the documents. Following the detection, the regulators along with the state attorney generals (AGs) had started an inquiry on almost all mortgage servicers including JPMorgan, BofA, Ally Financial Inc., Wells Fargo & Company (WFC) and Citigroup Inc. (C).
In February, the initiatives to settle critical deficiencies with mortgage servicers were held back due to disagreements among the groups involved over the strictures of fines and penalties. However, on Wednesday, the regulators – the Office of the Comptroller of the Currency, the Federal Reserve, the Office of Thrift Supervision and the Federal Deposit Insurance Corporation – announced an agreement, under which the 14 largest mortgage servicers, including JPMorgan, BofA and Well Fargo, would review all foreclosed loans from 2009 and pay back losses where cases were messed up.
The deal also debars the mortgage services to take hold of homes where borrowers have negotiated a trial or permanent loan modification. They are also required to enhance the foreclosure procedure by improving document-tracking systems, hire staff and assign a single point of contact for each borrower.
Hence, with the fulfillment of the above mentioned requirements, foreclosure activities are bound to rise in the near future. Therefore, this is perhaps not the time to relax and believe that foreclosures would dwindle. Decline in foreclosures is a just sign that the lenders are not speeding up the process. Once the foreclosure mess is fully resolved, foreclosures would shoot up as many homeowners are defaulting on loan payments due to high levels of unemployment and fall in property prices.