Foreclosures Plunge, Will Rise Soon - Analyst Blog

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Last week, RealtyTrac, the leading online marketplace of foreclosure properties, released its foreclosure market report for February 2012. According to the report, foreclosure filings for the month dipped 2% from the prior month and 8% from the prior-year month, with a total of 206,900 properties receiving default, auction or repossession notices.

This was the lowest annual decline in foreclosure activity since October 2010. Actually, the drop in foreclosure activities in larger states was chiefly responsible for the fall in its results, though 21 states reported a rise in the foreclosure activities in February 2012.

Though there was a drop in overall foreclosure activity for the month under review, they are bound to increase in the upcoming months due to the $25 billion settlement deal that took place between five mortgage servicers - JPMorgan Chase & Co. ( JPM ), Bank of America Corporation ( BAC ), Citigroup Inc. ( C ), Ally Financial Inc. and Wells Fargo & Company ( WFC ), 49 states' attorneys general and the regulators. The deal will speed up the rate of the foreclosure activities, which was almost frozen until now.

The major indicator, which confirmed that the foreclosures will surge over the next several months, is the rise in the new default notices issued. Issuance of default notice, the first step in the foreclosure process, inched up 1% on a month-over-month basis, but dipped 7% year over year to 58,886. Moreover, issuance of default notices increased nearly 20% year-over-year in those states where court orders are required before the foreclosure procedure begins.

Conversely, in February 2012, foreclosure auctions fell 2% from January 2012 and 13% from February 2011 to 84,180 properties. Likewise, the final stage -- i.e. bank repossessions -- slipped 4% from the previous month and 1% from the year-ago month to 63,834 properties. The top 10 states with the highest foreclosure activities were Nevada, California, Arizona, Georgia, Florida, Illinois, Michigan, South Carolina, Ohio and Wisconsin.

Further, for the month under review, foreclosure activity in 26 states with a judicial foreclosure process declined 2% from January 2012 but rose 24% from February 2011. However, in 24 states where a non-judicial foreclosure process is followed, there was 5% fall from the prior month and 23% decline on year-over-year basis.

Still a Long Way to Go

With nearly all the problems related to flawed paper work getting resolved, the downtrend in foreclosures will get reversed very soon. Moreover, the settlement deal clearly describes the procedures to be followed while foreclosing a property. This will allow the mortgage servicers to step up the foreclosure activities. Moreover, RealtyTrac expects foreclosures to rise 25% this year to 1 million homes, compared with 804,000 homes that were foreclosed in 2011.

Also, there will be additional pressure on the home prices across the nation as many properties are expected to come to the market due to increased foreclosure activities. We hope that there would be enough number of buyers for these properties; otherwise the housing market will have little chance of regaining a solid foothold. As for now, we should gear up to see an exceptional rise in foreclosure activities.


 
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