Spike in Foreclosures as Banks Ramp Up Repossessions
Foreclosures spike as banks ramp up repossessions
November 12, 2014CNBC - More than five years after the foreclosure crisis began, the number of borrowers losing their homes is rising again.
Most of the troubled loans are
not new; instead, the backlog of homes in the foreclosure process is
finally starting to move more quickly. There was, however, a slight
uptick in foreclosures on loans made in 2013 and 2014, a troubling turn.
Foreclosure filings, which
include default notices, scheduled auctions and bank repossessions, were
reported on 123,109 properties in October, according to RealtyTrac, a
foreclosure sales and data company. That is a 15 percent increase from
September, and the largest monthly increase since the peak of the crisis
in March of 2010. The numbers are still down 8 percent from a year ago.
Foreclosure activity usually
spikes in the months before the holiday season, as banks want to get as
many done before implementing holiday moratoria. Over the past three
years there has been an average 8 percent monthly uptick in foreclosure
auctions in October.
"But the sheer magnitude of the increase this year demonstrates there is more than just a seasonal pattern at work," said RealtyTrac vice president Daren Blomquist. "Distressed properties that have been in a holding pattern for years are finally being cleared for landing at the foreclosure auction."
Since
the crisis began, there has been a distinct difference in foreclosure
volumes between states that require a judge in the process and those
that do not. Now the difference is fading. Foreclosure auctions in
judicial states rose 21 percent month-to-month, while those in
non-judicial states rose 27 percent.
"There is still strong demand from the large institutional investors at the foreclosure auction in some markets, but even in markets with decreasing demand at the foreclosure auction, banks can be confident in selling REO [repossessed] properties quickly and at a good price," Blomquist added. "That's because there is still strong demand from buyers, particularly in the lower price ranges, combined with a dearth of distressed homes listed for sale."
Strong buyer demand at
foreclosure auctions has helped stem the number of properties being
repossessed by banks. October, again, was an anomaly, with lenders
taking ownership of nearly 28 thousand properties, up 22 percent from
September. Still, repossessions were down 26 percent from a year ago.
"We see far more opportunity to buy than we have capital," said Laurie Hawkes, president and COO of American Residential Properties, a Scottsdale, Arizona-based, single-family rental REIT in a September interview. "The fallacy is that the buying is over. It's not."
But it is slowing for large
institutional investors, especially as home prices continue to rise. In
some markets, however, where home prices have risen most in the
recovery, banks would rather repossess the homes because they know they
can sell them for a good price. As investors slow their buying, banks
are getting more aggressive with long-delinquent borrowers.
Among the nation's top 20
metropolitan housing markets, Miami, Tampa, Baltimore, Riverside-San
Bernardino and Chicago had the highest foreclosure rates, according to
RealtyTrac. Investors have been moving to these markets from former
foreclosure hot spots, like Phoenix and Las Vegas.
Read More Home prices and supply map
Most of the loans going through
the foreclosure process now have been delinquent for several years, but
a particularly troubling sign was the number of newly started
foreclosures in October: 56,452 homes. That is a 12 percent jump from
September, though down 4 percent from a year ago.This was the largest
monthly increase in foreclosure starts since August 2011.
"Many of the mediation programs, loan modification programs and even short sale programs have run their course. Distressed properties that could not be saved by those programs are being placed back on the foreclosure track," noted Blomquist.
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