U.S. Foreclosure Filings Drop to Two-Year Low Amid Lender Delays

Foreclosure filings in the U.S. plunged to a two-year low last month as lenders and loan servicers reviewed practices under legal scrutiny around the country, according to RealtyTrac Inc.

A total of 262,339 U.S. properties received default or auction notices or were seized in November, down 21 percent from October and 14 percent from a year earlier, RealtyTrac said in a report today. Those were the biggest monthly and annual declines since the Irvine, California-based data company began reports in January 2005. One in every 492 households got a filing.

All 50 states are investigating whether faulty documents and signatures were used by lenders on hundreds of thousands of foreclosure papers in a process that has come to be known as “robo-signing.” The coordinated probe began in October after the biggest U.S. banks suspended some home repossessions to review their procedures. A seasonal drop in filings of 7 percent to 10 percent is typical for November, according to RealtyTrac.

“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,” James J. Saccacio, the firm’s chief executive officer, said in the report.

State Investigations

A U.S. District Court judge in Maine last week allowed GMAC Mortgage LLC to continue selling foreclosed homes in the state, ruling that federal courts have limited authority on the issue. GMAC, owned by Detroit-based Ally Financial Inc., has also been sued by the state of Ohio in a foreclosure complaint. The multistate probe may end in multiple settlements, Iowa Attorney General Tom Miller, the investigation’s leader, said last month.

Demand for foreclosed properties may slump amid the inquiry, RealtyTrac said earlier this month. Distressed homes accounted for a quarter of all residential sales in the third quarter, according to the company.

The foreclosure filings last month were the fewest since November 2008. Ten states had more than 70 percent of the total.

Unemployment near 10 percent and “economic displacement” has pushed the foreclosure crisis into states such as Utah, Oregon and South Carolina, Rick Sharga, RealtyTrac’s senior vice president, said in a Bloomberg Television interview today. That’s a different cause than the lax lending standards that led to defaults in Nevada, Florida, California and Arizona, he said.

Default Decline

Default notices in November dropped 31 percent from a year earlier to 78,955, the fewest since July 2007 and the 10th straight annual decline, RealtyTrac said. In the states where courts oversee foreclosures -- where most lenders have concentrated their reviews -- default notices decreased 43 percent year-over-year.

Auction notices were little changed from a year earlier at 115,956. In judicial states, auctions decreased 12 percent from November 2009, RealtyTrac said.

Bank seizures of homes declined 28 percent from October and 12 percent from a year earlier to 67,428, the lowest tally since May 2009. They fell in 37 states and the District of Columbia.

Even with the slowdown, home seizures for 2010 surpassed 980,000, more than last year’s total, RealtyTrac said.

Nevada had the highest foreclosure filing rate for the 47th straight month, at one in every 99 households, five times the national average. Filings rose 22 percent from a year earlier.

Utah Jump

Utah had the second-highest rate at one in 221 households, up from sixth place last month, and California was third at one in 233. Filings in the most populous state fell 22 percent from November 2009.

Arizona, Florida, Georgia, Michigan, Idaho, Illinois and Colorado rounded out the top 10 highest rates, RealtyTrac said.

California, a non-judicial state, had the most filings in November and contributed more than a fifth of the U.S. total with 57,378. Florida, a judicial state, had the second-most filings at 32,938, a 38 percent drop from a year earlier.

Michigan, a non-judicial state, ranked third with 15,311 filings. Georgia was fourth at 14,423 and Texas was fifth at 13,369. Illinois, Nevada, Ohio, Arizona and Pennsylvania were also among the 10 highest filing totals.

The Las Vegas metropolitan area, with a foreclosure rate of one in 86 households, ranked highest for cities with populations of more than 200,000. Six California cities were second through seventh: Stockton, Bakersfield, Modesto, Vallejo, Merced and Riverside-San Bernardino.

Reno, Nevada, was eighth; Sacramento, California, ranked ninth; and Port St. Lucie, Florida, was 10th, said RealtyTrac, which sells data from counties representing 90 percent of the U.S. population.

To contact the reporter on this story: Dan Levy in San Francisco at dlevy13@bloomberg.net.

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

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