Foreclosure Filings in U.S. Drop to Three-Year Low After Paperwork Delays

Foreclosure filings in the U.S. fell in the first quarter to the lowest level in three years as lenders worked through their backlog of flawed paperwork related to home seizures, according to RealtyTrac Inc.

A total of 681,153 U.S. properties received default, auction or repossession notices in the three months through March, down 15 percent from the fourth quarter and 27 percent from a year earlier, the Irvine, California-based data seller said today in a report. Delays from the documentation scandal accounted for the low tally, the smallest since the first quarter of 2008, RealtyTrac said.

“It may take another quarter to work itself out,” Rick Sharga, the company’s senior vice president, said in a telephone interview. The extended crisis means “a longer period of high foreclosures, and that portends a longer downturn in housing,” which may not end until 2015, he said.

Seven states had record year-over-year declines in filings during the first quarter, with drops of 68 percent in Maryland, 65 percent in Connecticut, 62 percent in both Florida and Massachusetts, 44 percent in New Jersey, 42 percent in Oregon and 36 percent in Indiana, Daren Blomquist, RealtyTrac’s marketing director, said in an e-mail. All but Oregon are so- called judicial states that put state courts in charge of overseeing foreclosures.

An agreement with regulators announced yesterday requires the 14 largest U.S. mortgage servicers to identify and pay back homeowners who lost money from mishandled foreclosures or loans. The banks that are party to the settlement, which outlines the first penalties related to the scandal, didn’t admit or deny findings of faulty mortgage processing.

‘Fair and Orderly’

“Our enforcement actions are intended to fix what is broken, identify and compensate borrowers who suffered financial harm, and ensure a fair and orderly mortgage servicing process going forward,” John Walsh, acting comptroller of the currency, said in a written statement.

Officials from the Justice Department, the Department of Housing and Urban Development and 10 state attorneys general met with banks yesterday, the second such meeting to negotiate a global settlement. The group is discussing potential fines and whether servicers should be required to reduce the principal on some home loans.

One in every 191 U.S. households received a foreclosure notice in the first quarter, RealtyTrac said.

Default notices fell 17 percent from the previous three months and 35 percent from a year earlier, while auction notices dropped 19 percent and 27 percent, respectively.

Home Seizures Decline

The number of homes seized by lenders totaled 215,046, a decline of 6 percent from the fourth quarter and 17 percent from the first three months of 2010. In states where courts do not supervise foreclosures, home seizures increased 9 percent from the previous quarter.

Nevada had the highest rate of filings per household, with one in every 35 getting a notice. Arizona ranked second at one in 60, and California was third at one in 80, RealtyTrac said.

Utah, Idaho, Georgia, Michigan, Florida, Colorado and Illinois also ranked among the states with the 10 highest rates.

California had the most filings in the quarter at 168,543, almost 25 percent of the U.S. total. Florida was second with 58,322 and Arizona third with 46,047.

Georgia, Michigan, Texas, Illinois, Nevada, Ohio and Colorado rounded out the top 10, according to RealtyTrac, which sells default data from more than 2,200 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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