Drops in Foreclosure Activity Still Insignificant to Problem States

New data reaffirm that state laws have and will continue to have a noticeable effect on foreclosure rates nationwide and even more so in some of the most the problematic states such as Florida.

The RealtyTrac U.S. Foreclosure Market Report shows 262,339 foreclosure filings that include default notices, scheduled auctions and bank repossessions were filed in November 2010, up 21% from the previous month.

Nevada reigns supreme as the state with the highest foreclosure rate for the 47th consecutive month—despite a 20% decrease in foreclosure activity during the month.

While the monthly deterioration was significant, a longer-term view of the marketplace indicates national foreclosure rates improved compared to November 2009 when the number of foreclosure filings was 14% higher than the current.

In November of this year one in every 492 housing units received a foreclosure filing. An overall improvement according to RealtyTrac CEO, James J. Saccacio, is that foreclosure activity “decreased dramatically” since fewer than 300,000 properties received a foreclosure notice “for the first time since February 2009.”

He attributed the change at least in part to a 7% to 10% seasonal drop in the number of foreclosures that is typical for November.

Plus, the fallout from the foreclosure robo-signing controversy “forced lenders and servicers to hit the pause button on many foreclosures while they scrambled to revamp their internal procedures and revise or resubmit questionable paperwork.”

Both the November 21% month-over-month decrease and 31% year-over-year decrease in foreclosure activity are the highest since RealtyTrac began publishing the U.S. Foreclosure Report in January 2005.

A total of 78,955 properties received default notices in November marking the 10th straight annual decrease in default notices since its lowest level in July 2007.

The obvious question remains: Are these improvements significant enough to also mark a turnaround of the foreclosure crisis even if small? And here is where foreclosure regulation comes into play.

Default notices in states that practice judicial foreclosures or lis pendens filings decreased 31% from October and 43% from November 2009—compared to a mere 9% and 12% decrease, respectively, in nonjudicial states.

First-time foreclosure auctions were scheduled on 115,956 U.S. properties in November, 16% down from the previous month and unchanged from November 2009.

Also on a monthly and year-over-year basis judicial foreclosure auctions decreased 34% and 12%, while scheduled nonjudicial foreclosure auctions decreased 7% but increased 5% from November 2009.

In total, lenders foreclosed 28% less compared to October and 12% compared to November 2009. Bank repossessions also decreased month-over-month in 37 states and the District of Columbia, but not enough.

In November the year-to-date 2010 REO total reached over 980,000 or above the record yearend total for 2009.

Nevada, Utah and California remain the top states in foreclosures. Other states with foreclosure rates ranking among the top 10 in November were Arizona, Florida, Georgia, Michigan, Idaho, Illinois and Colorado.

Once again in November 10 states accounted for over 70% of the national total of foreclosure filings, with California at the top representing 22% of the national total, or 57,378 properties.
Despite a 20% monthly decrease in foreclosure activity, Nevada posted the nation’s highest state foreclosure rate for the 47th straight month.

Similarly, despite a 42% drop in foreclosure activity from the previous month Florida came second with 32,938 properties receiving a foreclosure filing in November.

Compared to the previous month foreclosure filings decreased 52%, scheduled auctions decreased 46% and bank repossessions decreased 20%, which is higher than the ratio in other problematic states that are primarily nonjudicial.

Foreclosure filings in Florida—a judicial foreclosure state—clearly are primarily affected by the state’s regulatory requirements rather than delinquencies.

To put things into perspective, findings from an analysis of RealtyTrac’s 3Q 2010 U.S. Foreclosure Sales Report showed that Florida’s metropolitan areas have some of the highest serious delinquency rates in the country, which “are still rising rapidly.”

Nine out of the top 10 and 15 out of the top 25 metro areas with the highest serious delinquency rates in June 2010 were in Florida. Of the 25 metro areas with the biggest growth in serious delinquency rates from June 2009 to June 2010, up to 11 were in Florida suggesting “foreclosure problems in Florida have not yet stabilized.” The Miami area is one example. The area posted the highest serious delinquency rate with 25.6% of all mortgages being seriously delinquent in June 2010, up 4.3% from June 2009.

By comparison, in California, which is categorized as “primarily a nonjudicial foreclosure state,” the number of foreclosure filings decreased 11% and bank repossessions decreased 40% from October.
In Michigan, also a nonjudicial state, filings decreased 4% from the previous month, while scheduled auctions decreased 20% and REOs decreased 35%.

Similarly the nonjudicial states of Georgia and Texas that have short foreclosure processes and do not require a public default notice separate from the published foreclosure auction notice saw double-digit percentage increases in scheduled auctions from the previous month but also documented double-digit percentage decreases in bank repossessions from the previous month.

Michigan foreclosure activity dropped 21% from the previous month. Yet, with 15,311 properties receiving a foreclosure filing in November it is the state with the third highest rate of filings.

Georgia posted the fourth highest state total with 14,423 properties receiving a foreclosure filing, followed by Texas with 13,369 properties receiving a foreclosure filing.