Foreclosure Reality Distorted by Processing Delays

by devteam July 14th, 2011 | Share

RealtyTrack has reported a generally downward trendrnin foreclosure filings since last fall, but the monthly variations tended tornmask the magnitude of the trajectory. rnThe mid-year report, released on Thursday, solidifies the impression ofrnan improving situation.  Foreclosurernfilings nationwide were down 29 percent during the first half of 2011 comparedrnto the last half of 2010 and were 25 percent lower than filings during thernfirst half of last year.</p

Still,rnthe numbers are still depressing; one in every 111 housing units (0.9 percent)rnreceived some type of foreclosure filing during the six month period, a totalrnof 1,170,402 filings. rn</p

RealtyTrac,rnan Irvine California firm bases its reports on a database derived from arnnationwide survey of foreclosure filings in three categories:</p<ol

  • Notice of Default (NOD) and Lis Pendens (LIS). This is thernfirst legal notification from a lender that the borrower on a mortgage loan hasrndefaulted under the terms of their mortgage and the lender intends to foreclosernunless the loan is brought current.</li
  • Auction – Notice of Trustee Sale and Notice ofrnForeclosure Sale (NTS and NFS): if the borrower does not catch uprnon their payments the lender will file a notice of sale (the lender intends tornsell the property). This notice is published in local paper and containsrninformation pertaining to the date, time and subject property address.</li
  • Real Estate Owned or REO properties : “REO” stands forrn”real estate owned” and typically refers to the inventory of realrnestate that banks and mortgage companies have foreclosed on and subsequentlyrnpurchased through the foreclosure auction if there was no offer higher than thernminimum bid.</li</ol

    Junernfilings were up 4 percent from those in May but were still down 29 percent fromrnJune 2010 marking the ninth straight month where filings were down on arnyear-over-year basis.  The June increasernaffected all three categories of filings. </p

    The report contains not only halfrnyear and June data but also information on the second quarter of 2011 duringrnwhich there were 608,235 foreclosure filings. rnThis was a decrease of 10.7 percent form quarter one and 32 percent fromrnthe second quarter of 2010.</p

    The length of time from default tornforeclosure auction continues to grow.  U.S.rnproperties foreclosed in the second quarter were in the foreclosure process anrnaverage of 318 days from the initial foreclosure notice to the completedrnforeclosure, up from a revised 298 days in the first quarter and 277 days inrnthe second quarter of 2010. </p

     “It would be nice to report that foreclosurernactivity is dropping as a result of improvements in the economy or the housingrnmarket,” said James J. Saccacio, chief executive officer of RealtyTrac.rn”Unfortunately, with unemployment rates inching back up, consumer confidencernweak and home sales and prices continuing to languish, this doesn’t appear tornbe the case. </p

    “Processingrnand procedural delays are pushing foreclosures further and further out – wernestimate that as many as 1 million foreclosure actions that should have takenrnplace in 2011 will now happen in 2012, or perhaps even later. This casts anrnominous shadow over the housing market, where recovery is unlikely to happenrnuntil the current and forthcoming inventory of distressed properties can bernwhittled down to a manageable number.”</p

    Nevada,rnArizona, and California continue to have the highest rate of foreclosurernfilings.  In Nevada one in every 21rnhousing units received a filing during the first half of 2011, a drop of 17rnpercent from both the previous six months and from the first half of 2010.  In Arizona one in 36 housing units received arnfiling, a decrease of 6.9 percent from the previous quarter and 15.3 percentrnfrom a year earlier; in California the rate was one in 51 units, down 13.2rnpercent and 22.7 percent.  </p

    Otherrnstates with foreclosure rates ranking among the nation’s 10 highest were Utah,rnGeorgia, Idaho, Michigan, Florida, Colorado, and Illinois. </p

    Statesrnwith the most lengthy foreclosure process were New York (966 days), New Jerseyrn(944 days), and Florida (676 days.)  Texas,rnhowever, wastes no time, foreclosing on the average property in 92 daysrnfollowing default.  </p

    U.S.rnREO properties that sold in the second quarter took an average of 178 days tornsell from the time they were foreclosed, up slightly from 176 days in the firstrnquarter and up from 164 days in the second quarter of 2010. REO properties tookrnthe longest to sell in New York, 309 days, followed by New Jersey at 285 daysrnand Minnesota at 268 days.

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  • About the Author


    Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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