Robo-signing still taming foreclosures

Fallout from the robo-signing scandal kept a lid on foreclosure filings in January, data aggregator RealtyTrac said, particularly in judicial foreclosure states where courts oversee the process.

But there are warning signs that the lid is set to blow, with filings already picking up in non-judicial foreclosure states.

Before procedural issues that surfaced last fall slowed new foreclosure filings and processing of existing cases, RealtyTrac’s inspections of public records had logged 20 consecutive months when at least 300,000 properties were hit with foreclosure-related filings.

In November, that number dipped below the 300,000 mark for the first time in nearly two years, and has yet to bounce back.

Lenders filed foreclosure-related filings including default notices, scheduled auctions and bank repossessions against 261,333 U.S. homes in January, up 1 percent from December but down 17 percent from a year ago, RealtyTrac said.

It’s less of a sign of a housing recovery than an indication that lenders have become bogged down in reviewing procedures, resubmitting paperwork and formulating legal arguments related to accusations of improper foreclosure processing, said RealtyTrac CEO James Saccacio.

The robo-signing controversy first took hold in judicial foreclosure states like Florida and Massachusetts, when attorneys for homeowners questioned procedures used by loan servicers to demonstrate their legal standing to foreclose on delinquent borrowers.

The number of homes hit with foreclosure filings in Florida fell for the fourth month in a row in January, to a 42-month low. A total of 21,671 homes were subjected to some type of filing, down 15 percent from December and 54 percent from a year ago.

While nine Florida cities made RealtyTrac’s list of the top 20 metro area foreclosure rates for 2010, none showed up on the list in January.

In Massachusetts — where the state Supreme Court recently upheld a lower court decision invalidating two foreclosures — the number of properties subjected to foreclosure filings was down nearly 5 percent from December to January, and more than 65 percent from a year ago.

While courts handle most or all foreclosures in 23 states and are involved in the process in three others, the impacts of the robo-signing controversy have rippled through the entire system. Attorneys general in all 50 states are coordinating investigations into foreclosure procedures, and lenders have been reviewing their own foreclosure practices in both judicial and non-judicial states.

But the slowdown in foreclosure filings may only be temporary, with several important non-judicial foreclosure states posting significant gains in January.

In eight of the 10 states with the highest rates of foreclosure filings — Nevada, Arizona, California, Idaho, Utah, Michigan, Georgia, and Colorado — all or most proceedings are handled non-judicially, outside of the court system.

Foreclosure filings surged from December to January in all but two of those states — Nevada and Colorado — jumping 16 percent in Arizona and Georgia and 29 percent in Idaho.

The monthly increases were more modest in California (2 percent) and Michigan (4 percent), but more California homes were hit with foreclosure filings than any other state — 67,072.

More than half of all properties hit with foreclosure related filings in January — 139,477– were located in five non-judicial foreclosure states — California, Michigan, Arizona, Texas. Georgia and Nevada. The number of properties subjected to foreclosure filings grew from December to January in each of those states except Nevada.

Although filings were down 13 percent from December, Las Vegas had the highest foreclosure rate of any metro in the nation, with one in 82 homes subjected to a filing in January. That compares to an average of 1 filing per 497 homes for the U.S. as a whole.

California cities dominated RealtyTrac’s list of metro markets with the highest foreclosure rates, claiming seven of the top 10 spots.

Modesto was second on the list, with one in 111 housing units receiving a foreclosure filing, followed by Stockton (1 in 114); Riverside-San Bernardino-Ontario (1 in 120); Reno-Sparks, Nev.(1 in 132); Vallejo-Fairfield (1 in 135); Bakersfield (1 in 143); Phoenix-Mesa-Scottsdale, Ariz. (1 in 143); Merced (1 in 149); and Sacramento-Arden-Arcade-Roseville (1 in 151).

RealtyTrac’s numbers demonstrate that the slowdown in both new foreclosure filings and processing of existing cases has been more pronounced in judicial foreclosure states.

RealtyTrac broke out foreclosure filings from 23 judicial foreclosure states for analysis: Connecticut, Delaware, Florida, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Vermont, and Wisconsin.

Filings from Hawaii and Nebraska, where foreclosures are processed both judicially and non-judicially, were also included in the analysis, as were filings in North Carolina, where most foreclosures are processed non-judicially, but a preliminary hearing is held before a foreclosure sale can take place.

In the 26 judicial foreclosure and partial judicial foreclosure states, RealtyTrac found 84,701 homes were subjected to some type of foreclosure filing in January — down 6 percent from December and 34 percent from a year ago.

In 24 non-judicial foreclosure states and Washington, D.C., foreclosure filings were up 6 percent from December, to 176,632, which represented a 6 percent drop from a year ago.

In non-judicial foreclosure states, 36,431 homes were subjected to default notices in January — essentially unchanged from December, and down 8 percent from a year ago. But default notices in judicial foreclosure states were down 2 percent from December, to 38,767 — a 39 percent drop from a year ago.

There was a similar trend in auction notices, which in non-judicial foreclosure states fell 1 percent from December, to 85,799, a 3 percent drop from a year ago. In judicial foreclosure states, auctions were down 14 percent from December, to 22,203, a 39 percent decrease from a year ago.

Bank repossessions were up 23 percent in non-judicial foreclosure states from December to January, as lenders added 54,402 homes to their real estate-owned (REO) inventories. Bank repossessions in judicial foreclosure states were down 7 percent from December, to 22,203. Looking back a year, bank repossessions were down 9 percent in judicial foreclosure states and 16 percent in non-judicial foreclosure states.

January 2011 foreclosure filings, by state

^Judicial foreclosure state
*Increase may reflect data collection changes

Source: RealtyTrac