According to the data released by RealtyTrac, the leading online marketplace of foreclosure properties, foreclosure filings in August rose 7% from the prior month with 228,098 properties issued notices of default, auction or repossession during the month. However, this is still down 33% from August 2010 figures.
As per the source, a total of 5 states – California, Florida, Michigan, Illinois and Georgia – accounted for about 53% of the overall foreclosure activity in the month under review.
Though there was surge in new defaults, the number of property auctions and repossessions by banks continued to decline in August. Issuance of default notice, the first step in the foreclosure process, surged 33% sequentially but dropped 18% year over year to 78,880. This is the largest sequential rise since August 2007.
However, foreclosure auctions fell 1% from July and plunged 43% from August 2010 to 84,405 properties, which is a 37-month low figure. Similarly, rate of bank repossessions, the final stage, slipped 4% from the previous month and 32% from the year-ago comparable period to 64,813 properties, marking a six-month low figure.
Additionally, according to the report, mortgage servicers are expected to repossess about 800,000 homes this year.
The increase in overall foreclosure activity indicates that the banks and mortgage servicers have stepped up their resources and started taking actions against those homeowners, who have failed to make mortgage payments. This is almost a year after the banks and mortgage servicers, including JPMorgan Chase & Co. (JPM), Bank of America Corporation (BAC) and Ally Financial Inc., had temporarily suspended foreclosures across the country.
The reasons behind the halt and decline in foreclosure activity over the last year were flawed paperwork, delays due to process held up in courts, re-filing of earlier filed foreclosure cases, enquiries by regulatory agencies and reluctance of lenders to take back properties resulting from declining home sales.
Further, a combination of various measures – loan modifications, lender-borrower mediations and mortgage payment assistance for the unemployed, – were also taken up by national and state-level regulators to allow distressed home owners to prevent foreclosures.
However, with many of the problems getting resolved or in verge of resolution, the foreclosures are bound to rise. The increase in foreclosure activity also shows that the U.S. housing market is on the threshold of a turnaround but it will not be as fast as required. Hence, we should now gear up for an exceptional rise in foreclosure activities over the next several months.