Foreclosures of U.S. Homes Fell 36% After Freeze, Lender Processing Says

The number of U.S. homes seized by banks tumbled more than a third in October after loan servicers imposed a moratorium to probe whether repossessions were properly conducted, according to Lender Processing Services Inc.

Banks took over 79,886 homes, down 36 percent from a record 124,051 in September and the lowest number since May 2009, the Jacksonville, Florida-based real estate data company said in a report today. Lender Processing bases its figures on information collected from loan servicers at the time of foreclosure.

Bank-owned homes are among the most affordable real estate and a drop in their numbers may keep some homebuyers out of the market, said Sean O’Toole, chief executive officer of ForeclosureRadar.com, a real estate service in Discovery Bay, California, that tracks foreclosure sales in five western states. Sales of existing homes fell 2.2 percent in October, according to a National Association of Realtors report today.

“If there are many fewer, it could have an impact on one of the hottest selling segments,” O’Toole said in a telephone interview.

RealtyTrac Inc. reported Nov. 11 that home seizures dropped 9 percent in October. Its data are based on when foreclosures are recorded in local government registers, so some of the homes counted by Lender Processing may be included in RealtyTrac’s November figures, Daren Blomquist, a spokesman for the Irvine, California-based real estate data service, said in an e-mail.

The Lender Processing numbers are “pretty close” to those collected by ForeclosureRadar, whose data are based on auction sales in California, Arizona, Nevada, Oregon and Washington, O’Toole said.

Rising Delinquencies

The decline in seizures led to an increase in the number of mortgages with late payments for the first time since May, LPS reported. Delinquencies climbed 0.4 percent to 7.04 million. It took an average 492 days for banks to foreclose on homes, up from 484 days in September and 382 days in October 2009.

The number of homes in the last stage of the foreclosure pipeline before becoming bank-owned property or selling at a foreclosure auction increased 1.7 percent from September to 2.09 million.

Lenders including Bank of America Corp., JPMorgan Chase & Co. and Ally Financial Inc. began suspending some foreclosures in September after reports that employees improperly processed paperwork for home seizures. The suspensions led to investigations by attorneys general in all 50 states and congressional hearings.

Lender Processing, the biggest U.S. mortgage and foreclosure outsourcing firm, was subpoenaed Oct. 13 by Florida Attorney General Bill McCollum, who says the company produced documents in foreclosure cases that appear to be fabricated.

The moratorium may have contributed to the decline in home sales last month, the National Association of Realtors said. Distressed sales, which include foreclosures and short sales in which the bank agrees to take less than the full amount of the mortgage, accounted for 34 percent of total transactions, about the same as in prior months.

To contact the reporter on this story: John Gittelsohn in New York at johngitt@bloomberg.net.

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net.

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