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Mortgage default notices slow sharply in January

By: The Associated Press//February 10, 2011

Mortgage default notices slow sharply in January

By: The Associated Press//February 10, 2011//

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iStock image used with permission.

Fewer U.S. homes entered the foreclosure process in January than in any month in more than three years, the latest sign lenders are taking longer to move against homeowners who have fallen behind on mortgage payments.

The number of homes that received an initial default notice fell 1 percent last month from December and tumbled 27 percent from January last year, foreclosure listing firm RealtyTrac Inc. said Thursday.

Scheduled foreclosure auctions also fell to the lowest level in two years, the firm said.

The delays stem partly from foreclosure paperwork problems that came to light last fall, leading many lenders to revisit thousands of foreclosure cases.

The foreclosure process across New York state continues to experience delays. A search of Monroe County Clerk’s Office records returned 1,927 notices of pendency related to mortgage foreclosure in 2010, compared with 2,443 the year before and 2,485 in 2008. Last year’s foreclosure halt and changes in document filing are the primary culprits.

Almost 80,000 residential foreclosures are pending on New York court dockets, all of which require plaintiffs’ counsel to submit affirmation of documents.

Some lenders that put foreclosure actions on hold temporarily last year have since resumed, but at a more measured pace, causing a decline in the foreclosure-related notices sent to households last month. Banks also have been letting borrowers who have missed payments stay in their homes longer so they can delay adding to their backlog of bad loans.

“We are still seeing the lingering after-effects of the documentation issues that plagued lenders through the last quarter of 2010,” said Rick Sharga, a senior vice president at RealtyTrac. “In some cases, courts are being more demanding and more particular about what they’ll even allow to go into foreclosure.”

While lenders are taking longer to move homes into the initial stage of the foreclosure process, they stepped up home repossessions in January.

Banks took back 78,133 properties last month, an increase of 12 percent from December, RealtyTrac said. The January total was down 11 percent from a year earlier, however.

Homeowners in states where judges play a role in the foreclosure process, such as New York, were less likely to see their homes repossessed last month. In those states, repossessions declined 7 percent from December and 16 percent from a year earlier.

Elsewhere, repossessions surged 12 percent between December and January, although they were down 9 percent versus the same month last year.

Banks took back more than 1 million homes last year. Despite the slowdown in the foreclosure process, lenders are still poised to repossess more homes this year than any other since the U.S. housing meltdown began in 2006.

About 5 million borrowers are at least two months behind on their mortgages.

And many of the factors that have contributed to the foreclosure crisis are also likely to continue driving foreclosures, including high unemployment, a weak housing market, flat-to-falling home values and tighter lending standards making it tougher for buyers to qualify for financing.

In all, some 261,333 properties received a foreclosure-related notice in January, up 1 percent from December and down 17 percent from a year earlier. That translates to one in every 497 U.S. households.

The firm tracks notices for defaults, scheduled home auctions and home repossessions — warnings that can lead up to a home eventually being lost to foreclosure.

The Daily Record staff contributed to this report

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