REO Rising at a Controlled Pace

Despite recent year-to-year declines in foreclosure filings, REO has risen to a record high for the third time in the last five months. But the latest figures suggest it is generally increasing at a more controlled pace in many areas, with the exception of states like California.

The trend lines of decreasing default notices that contribute to foreclosure filings and increasing bank repossessions are “a clear indication that the clogged foreclosure pipeline is being carefully managed on both ends by lenders and servicers,” said James Saccacio, CEO of RealtyTrac, Irvine, Calif.

“On the front end, seriously delinquent loans are rolling into foreclosure at an unusually slow rate, while on the back end the dammed-up inventory of properties already in foreclosure is moving to REO in steady stream rather than a flood—presumably to prevent further erosion of home prices.”

Mortgage servicers and banks repossessed more homes in August—95,364 units—than in any month since the start of the U.S. mortgage crisis, according to new figures compiled by RealtyTrac.

This amount is about 2% higher than the previous peak of 93,777 bank-owned properties in May 2010.
The report shows August REO activity increased 3% from July and was up 25% from August 2009, the ninth straight month where REOs have increased on a year-over-year basis.

California and Florida led the way with the most real estate-owned assets at 15,218 and12,329, respectively, for the month. Michigan, Arizona and Georgia rounded out the top five states with the highest totals.

Foreclosure filings, which include default notices, scheduled auctions and repossessions, were reported on 338,836 properties, a 4% increase from July but down 5% from August 2009. One in every 381 U.S. housing units received a foreclosure filing during the month.

California alone accounted for 20% of the national total in August, with 69,143 properties receiving some sort of foreclosure filing during the month, up 3% from July but a 25% decrease from a year ago.

Florida reported 17% of the national total with 56,877 properties receiving a filing, a 10% increase from July but a 9% decrease from August 2009. But default notices were down 46% from a year ago but increased 2% from July, ending five straight months of month-over-month decreases in Florida default notices.

Nevada maintained the nation’s highest state foreclosure rate despite a 25% year-over-year decrease in foreclosure activity in August and the 11th straight month where the state foreclosure activity has decreased on a year-over-year basis.

Michigan, Illinois and Arizona each accounted for about 5% of the national total in August, with 17,764 Michigan properties receiving foreclosure filings, 16,808 in Illinois, and 16,510 in Arizona.

Other states with foreclosure activity totals among the nation’s highest in August were Georgia (16,366), Texas (14,290), Ohio (13,479), Nevada (13,385) and Washington (6,760).

All 10 of the metro areas with the nation’s highest rates in August posted year-over-year declines in foreclosure activity for the second month in a row. RealtyTrac said Las Vegas still has the largest foreclosure rate for a population of 200,000 or more. One in every 73 housing units received a filing, despite a 25% dip in foreclosures from a year ago.

Foreclosure Radar, a privately held tracking firm in Discovery Bay, Calif., is reporting that banks took back more properties at auction than they resold during August, leading to a “continued climb in inventory of bank-owned homes,” up 4.79% since last month and 60.48% year-over-year.

The company changed the name of its monthly California Foreclosure Report to The Foreclosure Report by ForeclosureRadar, expanding coverage to Arizona, Nevada, Oregon and Washington.

In its first report under new name, the company said, in California, notices of default filings, the first step in the foreclosure process, jumped 16.6% during the month, the fourth successive increase in as many months. Fewer homeowners found foreclosure relief as foreclosure cancellations dropped 11.2% while more homes were lost, up 15.6% to 17,841 foreclosure sales.

After rising 28.8% from June to July in Arizona, notices of trustee sale dropped 12.2% in August.
In Nevada, after seeing an increase in the average opening bid at auction in July and a drop of sales to third parties, typically investors, opening bids in August dropped by 4.6%. The resulting sales to third parties increased by 26.6%. Lenders took a record 324 days from the filing of a notice of default to completion of the foreclosures sold at auction in August.

The number of properties scheduled for foreclosure sale in Oregon rose by 17.1% as the number of new notices of trustee sale significantly outpaced the number of foreclosures that were cancelled or sold. While the filings rose by 9.3%, notices of default were up 10.7%.

Foreclosure activity in Washington decreased across the board with NTS down 15.8%, foreclosure sales down 10.8% and foreclosure cancellations down 21.8%. Despite these declines, the number of properties scheduled for foreclosure sale rose by 2.7% and bank-owned inventories rose 9.4%.