Foreclosure Filings Drop to 40-Month Low as U.S. Lenders Delay Processing

Foreclosure filings in the U.S. fell 34 percent last month from a year earlier as lenders already swamped with seized homes delayed action on thousands of additional delinquent mortgages, RealtyTrac Inc. said.

A total of 219,258 properties received default, auction or repossession notices in April, the fewest in 40 months, the Irvine, California-based data seller said today in a statement. It was the seventh straight month that filings dropped from a year earlier. They were down 9 percent from March. One in 593 U.S. households got a notice.

“Banks already sitting on thousands of properties they can’t sell as quickly and profitably as they’d like aren’t going to be anxious to accelerate foreclosures on tens of thousands more,” Rick Sharga, RealtyTrac’s senior vice president, said in an e-mail.

The U.S. housing market faces “enormous challenges,” Brian Moynihan, chief executive officer of Bank of America Corp. (BAC), the largest U.S. bank, told shareholders yesterday in Charlotte, North Carolina. Three-fourths of U.S. cities had declines in home prices in the first quarter, according to the National Association of Realtors. Distressed properties, which include foreclosures and short sales, accounted for 40 percent of transactions in March, the group said.

As many as 11 million home loans are underwater, in foreclosure or close to default, Lewis Ranieri, a pioneer of mortgage securitization, said last week while urging lenders to reduce the debt of U.S. mortgage holders with solid credit histories.

Investigation by Attorneys

Foreclosure filings have been falling since U.S. attorneys general in October began a probe of lender practices including improper documentation. Bank of America and JPMorgan Chase & Co. (JPM) are among five U.S. mortgage servicers in talks with state and federal officials to settle the investigation.

RealtyTrac is planning to revise its forecast for 2011 foreclosures at midyear, Sharga said. A 20 percent increase in total filings, which the company predicted in January, is unlikely amid scrutiny of lenders and “market saturation” from distressed homes already for sale, he said.

Default notices were filed on 63,422 U.S. properties last month, close to a four-year low and down 39 percent from a year earlier, according to RealtyTrac.

Auctions were scheduled for 86,304 properties, the lowest number in 31 months and a decrease of 37 percent from April 2010, while lenders seized 69,532 homes, down 25 percent from a year earlier.

States where courts oversee foreclosures showed a 47 percent decrease in filings from a year earlier, while non- judicial states had a 26 percent decline, RealtyTrac said.

Highest in Nevada

Nevada had the highest rate of foreclosure filings per household at one in 97, with a record 4,606 homes seized. Arizona had the second-highest rate at one in 205 and California was third at one in 240. Utah, Idaho, Michigan, Florida, Georgia, Colorado and Oregon also ranked in top 10.

Ten states accounted for 70 percent of the U.S. filing total, led by California’s 55,869. Florida was second at 19,649 and Arizona third at 13,419. Michigan, Nevada, Illinois, Texas, Georgia, Ohio and Colorado rounded out the top 10.

RealtyTrac 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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