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U.S. Home Seizures Reach Record as Lenders Review Foreclosures

U.S. Foreclosures Rise to Record in 3Q
A short sale sign hangs outside a home for sale in Las Vegas, Nevada. Photographer: Jacob Kepler/Bloomberg

More than 100,000 U.S. homes were seized by lenders in September, a record number that probably will decline in coming months as major banks halt repossessions and review their foreclosure practices.

Lenders took over 102,134 properties last month, RealtyTrac Inc. said in a report today. That was the highest monthly tally since the company began tracking the data in 2005, surpassing the August record of 95,364. Foreclosure filings, including default and auction notices, rose 3 percent from the prior month to 347,420. One out of every 371 households received a notice.

Sales of properties in the foreclosure process accounted for almost a third of all U.S. transactions in the month, a sign that a prolonged delay in repossessions may hurt the housing market, RealtyTrac said. Bank of America Corp., the largest U.S. lender, said Oct. 8 it would curtail foreclosures across the country, while JPMorgan Chase & Co. and Ally Financial Inc. stopped seizures in 23 states where court approval is required.

“We’re talking about loans that are almost certain to be foreclosed on,” Rick Sharga, senior vice president of Irvine, California-based RealtyTrac, said in an interview. “The delays are only providing a stay of execution.”

Attorneys general in all 50 states began a coordinated investigation yesterday into whether lenders used false documents and signatures to justify foreclosures. Banks and mortgage companies would be “well served” to cooperate with the probe and should consider negotiating settlements with borrowers in cases of potential fraud, Ohio Attorney General Richard Cordray told Bloomberg Television.

Revising Procedures

“Banks treat their customers with contempt, but if someone can’t pay the mortgage, the lender gets the collateral,” Mark Goldman, a real estate professor at San Diego State University, said in a telephone interview. “At the end of the day, this is a procedural situation, and banks will revise their procedures.”

Foreclosure filings totaled 930,437 in the third quarter, a 4 percent rise from the previous three months and a 1 percent decline from the same period of 2009, according to RealtyTrac. Lenders seized a record 288,345 properties in the period, up 22 percent from a year earlier.

“We expect to see a dip in those bank repossessions -- and possibly earlier stages of the foreclosure process -- in the fourth quarter,” RealtyTrac Chief Executive Officer James Saccacio said in the report.

Judicial State Sales

Filings in the states most affected by courts reviews of foreclosure documents accounted for 40 percent of the total in the third quarter, RealtyTrac said. Those states had 36 percent of repossessions.

In September, foreclosure sales in those states made up 32 percent of all U.S. distressed transactions, based on preliminary RealtyTrac data.

Nationwide, sales of homes in default or foreclosure accounted for 31 percent of all transactions last month. Bank-owned properties made up 18 percent of sales, RealtyTrac said.

Nevada had the highest foreclosure filing rate for the 16th straight quarter. One in every 29 households got a notice, almost five times the national average. A total of 38,429 Nevada homes received filings, down 20 percent from a year earlier.

Arizona had the second-highest rate for the fifth straight quarter. One in 55 households, three times the national average, got a filing. Florida ranked third with one in 56 households and California was fourth at one in 70, RealtyTrac said.

Idaho ranked fifth, with one in 86 households. Filings were up almost 14 percent from a year earlier.

California Leads Filings

Five states accounted for more than a third of all U.S. filings, led by California’s 191,016. Filings in the most populous state fell 24 percent from a year earlier and 1.

Florida ranked second with 157,026 filings, little changed from a year earlier. Arizona was third at 49,103, down 2 percent from the third quarter of 2009.

Illinois was fourth at 47,802 filings and Michigan was fifth at 46,100. Both states showed increases on a quarterly and yearly basis. Others in the top 10 were Georgia, Nevada, Ohio, Texas and Washington, according to RealtyTrac.

The company sells default data from more than 2,200 counties representing 90 percent of the U.S. population.

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