Please ensure Javascript is enabled for purposes of website accessibility
Home / News / Foreclosures / Foreclosures on the rise in Rochester

Foreclosures on the rise in Rochester

Numbers remain low, nationally

More U.S. homes started on the foreclosure path in July, as lenders tackled a backlog of mortgages gone unpaid even as they pulled back on home repossessions

The number of homes that received an initial notice of default — the first step in the foreclosure process — increased 6 percent in July compared to the same month last year, foreclosure listing firm RealtyTrac Inc. said Thursday.

The numbers were starkly higher for New York state and the five-county Rochester metropolitan area, according to RealtyTrac Vice President Daren Blomquist.

He said there were 234 properties with foreclosure filings in Rochester in July, up 76 percent from the 133 filed in June and a 141 percent increase from the 97 filings in July 2011. The Rochester metro area includes Monroe, Livingston, Ontario, Orleans and Wayne counties.

Still, Blomquist said, despite the increases, Rochester and New York remain relatively low when compared to the rest of the country. He said New York, which saw a 39 percent year-over-year increase in foreclosure filings, ranked 40th highest. He said Rochester was 167th out of the 212 communities his company tracks.

“What’s happening in New York and several other states is that the lenders are finally catching up with the delayed foreclosures,” Blomquist said. “We believe there’s a lot of pent up inventory that the banks haven’t completed the process on that made the numbers look lower last year and in 2009 and 2010.”

He said New York, at 1001 days, has the longest average time to complete a foreclosure from the filing to repossession. New Jersey is second at 940 days. Texas, at 87 days, has the quickest process.

“The homeowners who have been missing their payments for months, more likely years, are now being pushed into foreclosure,” Blomquist said. “Many homeowners have been given a long reprieve, but the banks are not going to hold back from foreclosing forever so we’re seeing that they’re starting to ramp up and push these properties into foreclosure that likely have been delinquent for some time.”

He said the implication is that many properties in the beginning of the foreclosure process will end up as short sales, selling for less than is owed on the property, or bank-owned properties within the next few months.

“That may be good news for buyers looking to buy properties, but it’s more distressed sales which will not be beneficial to home values,” Blomquist said. “I think we expect this pattern to continue because there is a significant backlog of potential foreclosures in New York and we expect the pattern of increasing foreclosure activity to continue to the end of the year at least, as banks play catch-up.”

Filings of initial default notices have increased on an annual basis for three months in a row.

The trend comes as banks work to make up for time lost last year as the mortgage-lending industry grappled with allegations that it had processed foreclosures without verifying documents.

The nation’s biggest mortgage lenders reached a $25 billion settlement in February with state officials. That cleared the way for banks to address their backlog of unpaid mortgages.

On average, 104,000 homes have entered the foreclosure process each month going back to May. That’s well below the 178,000 per-month average in 2009, the year with the highest monthly average, RealtyTrac said.

The increase in homes entering the foreclosure process raises the possibility that more properties could end up being foreclosed upon in coming months. But of late, banks have been dialing back home repossessions and increasingly allowing the borrower to sell the home in a short sale. That’s when the bank agrees to accept less than what the seller owes on the mortgage.

Banks took back 21 percent fewer homes last month than in July last year, RealtyTrac said. Repossessions were down 1 percent from June. They’ve been down on an annual basis every month going back nearly two years.

“Lenders are much less likely now than they were even a year ago or two years ago to repossess a property after they’ve started the foreclosure process,” Blomquist said.

Completing the foreclosure process can potentially open banks up to liability if they’re accused of improper procedures. And short sales, on average, sell for $25,000 more than a bank-owned property, Blomquist said.

As a result, lenders are much more likely to look for alternatives, such as a short sale, a loan modification or refinancing.

So far this year, home repossessions have averaged about 57,000 a month. That puts the nation on track for just under 700,000 completed foreclosures this year, below the 800,000 recorded in 2011.

The latest crop of homes entering the foreclosure process does not signal that there is a fresh wave of homeowners in distress and missing payments. The majority of the loans entering the foreclosure process are mortgages that date back to the housing bubble years, Blomquist said.

Even so, the increase in foreclosure-starts could boost the number of homes that end up on the market for sale at a sharp discount to other properties. That means, barring another outcome, many of the homes that entered the foreclosure pipeline in recent months could end up weighing down the values of nearby homes when they hit the market.

A stronger housing market could mitigate the impact of future foreclosures on home prices, and home sales are expected to end up ahead of last year. But many economists still say the market is years away from a full recovery.

The number of homes receiving foreclosure-related notices last month increased generally in states where the courts play a role in the foreclosure process. Among them: New Jersey, Florida, Ohio and Illinois.

Many homes on the foreclosure path were left in limbo in those states last year, while mortgage lenders sorted out the foreclosure abuse allegations.

In contrast, foreclosure activity was down sharply in Arizona and California — foreclosure hotbeds throughout the housing downturn, but states where the court does not factor into the foreclosure process.

That didn’t keep California from posting the nation’s highest foreclosure rate last month. One in every 325 households reported a foreclosure-related notice in July, more than twice the national average.