U.S. lenders started foreclosures on more properties in the third quarter, the first increase in a year, as a backlog stemming from claims of faulty home seizures began to ease.
New foreclosures rose to 1.08 percent of all loans from 0.96 percent in the prior three months, according to a report today from the Mortgage Bankers Association in Washington. The rate had been falling since the third quarter of 2010, when regulators began investigating robo-signing, the practice of pushing through unverified paperwork.
Several of the nation’s largest banks called a temporary halt to foreclosures at the end of last year while they addressed claims of flaws in their court documents. The moratoriums clogged the entire foreclosure pipeline as banks investigated their procedures, said Patrick Newport, an economist at IHS Global Insight in Lexington, Massachusetts.
“Banks are starting to speed up the process now that they’ve cleaned up their paperwork,” Newport said in a telephone interview. “We’re seeing the backlog begin to move.”
Notices of default, the first step of the foreclosure process, fell every month from September 2010, when the claims first surfaced, to a five-year low in May, according to RealtyTrac Inc., a mortgage-data firm in Irvine, California.
Lower Delinquency Rate
Accelerating economic growth during the third quarter may have helped households to pay their bills on time. The delinquency rate that measures late mortgage payments for all U.S. home loans fell to 7.99 percent from 8.44 percent in the prior period, according to the Mortgage Bankers Association’s report today.
The U.S. economy expanded at a 2.5 percent pace in the three months ended in September, faster than the second quarter’s 1.3 percent rate, according to the Bureau of Economic Analysis. Growth in the first half of this year was the slowest since the end of the recession in mid-2009.
The improvement may not last. For the fourth quarter, the pace probably will slow to 2.3 percent, according to the median estimate among 86 economists surveyed by Bloomberg. The pace probably will decelerate to 2 percent in the first three months of 2012, the estimates show.
“While the delinquency picture changed for the better in the third quarter, the foreclosure data indicated that we are not out of the woods yet and that the issues continue to vary by geography,” Michael Fratantoni, the Mortgage Bankers Association’s vice president of research and economics, said in a statement.
Foreclosure starts in the third quarter were highest in Nevada, at 2.48 percent, followed by Florida, with a 1.96 percent share; Arizona, at 1.67 percent; and Rhode Island, at 1.66 percent, according to the group’s report. California, the nation’s largest state, was No. 5, with a 1.45 percent share.
Measuring all loans in foreclosure, Florida led the nation, at 14.5 percent. New Jersey was next at 8.08 percent, followed by Nevada, at 7.89 percent; and Illinois, with a 7.29 percent share. New York was No. 6, at 5.67 percent.