More U.S. homes are entering the
foreclosure process, but they're taking ever longer to get sold or repossessed
by lenders.
The number of U.S. homes that received a
first-time default notice during the July to September quarter increased 14
percent compared to the second quarter of the year, RealtyTrac Inc. said
Thursday.
That increase signals banks are moving more
aggressively now against borrowers who have fallen behind on their mortgage
payments than they have since industrywide foreclosure processing problems
emerged last fall. Those problems resulted in a sharp drop in foreclosure
activity this year.
The surge in default notices means
homeowners who haven't kept up their mortgage payments could now end up on the
foreclosure path sooner.
Story: Housing bust worst since Great Depression
Initial default notices are first step in
the process that can eventually lead to a home being taken back by a lender.
A pickup in foreclosure activity also means
a potentially faster turnaround for the U.S. housing market. Experts say a
revival isn't likely to occur as long as there remains a glut of potential
foreclosures hovering over the market.
The third-quarter increase in initial
defaults was largely a product of a spike in August. In September, default
notices were off 10 percent from August, RealtyTrac said.
Backlog
Still,
the jump in initial defaults during the July to September period is significant
because it is the first increase after five consecutive quarterly declines,
suggesting banks are gradually addressing their backlog of homes in foreclosure
and are now beginning to move on more recent home loan defaults, said
RealtyTrac CEO James Saccacio.
"While foreclosure activity in
September and the third quarter continued to register well below levels from a
year ago, there is evidence that this temporary downward trend is about to
change direction, with foreclosure activity slowly beginning to ramp back
up," Saccacio said.
Foreclosure activity began to slow last
fall after problems surfaced with the way many lenders were handling
foreclosure paperwork, namely shoddy mortgage paperwork comprising several
shortcuts known collectively as robo-signing.
Many of the nation's largest banks reacted
by temporarily ceasing all foreclosures, re-filing previously filed foreclosure
cases and revisiting pending cases to prevent errors.
Other factors have also worked to stall the
pace of new foreclosures this year.
Government probes
The process has been held up by court delays in states where judges
play a role in the foreclosure process, lenders' reluctance to take back
properties amid slowing home sales and a possible settlement of government
probes into the industry's mortgage-lending practices.
Those settlement talks, led by a group of
state attorneys general, have been undermined in recent weeks after state
officials in some states, including California and Massachusetts, have broken
with the rest of the states.
Mortgage applications up, along with rates
While banks appear more willing to start
the foreclosure countdown on borrowers, they haven't put a dent in the overall
length of the foreclosure process.
In the third quarter, it took an average of
336 days, or 11.2 months, for a U.S. home to go from receiving an initial
notice of default to being foreclosed by a lender, RealtyTrac said.
That's up from 318 days, or 10.6 months, in
the second quarter and represents the largest average span of time for the
foreclosure process since the first quarter of 2007, the firm said.
In all, 195,878 properties received a
default notice in the third quarter. Despite the sharp increase from the second
quarter, the total was still down 27 percent versus the third quarter last
year, RealtyTrac said.
Lenders took back 196,530 homes during the
quarter, down 4 percent from the second quarter and down 32 percent from the
same quarter last year.
Banks remain on track to repossess some
800,000 homes this year, down from more than 1 million last year, Saccacio
said.
RealtyTrac had originally anticipated some
1.2 million homes would be repossessed by lenders this year.
Meanwhile, a report by an interfaith group in St. Paul, Minn., found that foreclosures had
disproportionately affected low income and poor communities in the city, NBC station KARE reported Wednesday.
The group, ISAIAH, found three of St.
Paul's low-income neighborhoods saw the biggest drop in housing values in the
city over the last five years.
The neighborhoods of Dayton's Bluff and
Payne Phalen on the east side, and Thomas Dale — also known as Frogtown — have
seen home values drop about 50 percent since 2006. That's almost double the
drop in the more affluent Mac-Groveland, Highland and St Anthony Park neighborhoods.
Racial disparities
The report was titled "Widening the Gap: How the Housing Crisis
Deepened Racial Disparities in St. Paul and How to Fix it."
Kate Hess Pace, ISAIAH organizer, said
low-income and minority neighborhoods were more likely to be targeted for risky
subprime mortgages and the instances of foreclosure was more severe in these
communities.
"It's actually been widening
disparities between people of color and whites in terms of how it's impacted
neighborhoods, home value, the amount of vacant homes and generational
wealth," Pace said.
"We've got vacant houses that are
sitting there," Jill Henricksen, director of the Greater Frogtown
Community Development Corporation, added. "They are being broken into.
Garbage is being dumped. We are seeing an increase in prostitution. We are
seeing an increase in theft. All kinds of things around these properties."
