Occupy Detroit demonstration against Bank of America on October 18, 2011. The Bank of America earned over US$6billion in profits during the third quarter of the year. (Photo: Abayomi Azikiwe), a photo by Pan-African News Wire File Photos on Flickr.
Banks' foreclosure activity picks up in October
After about a year of increased regulatory scrutiny, banks boost the pace of foreclosure activity in October, filing actions on 230,678 U.S. homes, a 7% increase over September.
By Alejandro Lazo, Los Angeles Times
November 10, 2011
Banks are reasserting themselves against troubled borrowers, sending close to 78,000 properties into the first stage of the foreclosure process in October after a nearly yearlong slowdown brought on by increased scrutiny from regulators.
Foreclosure actions were filed on 230,678 U.S. homes in October, up 7% from the month before, according to a report by RealtyTrac of Irvine. The tally spans the major steps required for a lender to take back a home: sending a notice of default, filing the alert that a bank auction has been scheduled and repossessing the house.
A total of 77,733 U.S. properties entered the foreclosure process by receiving a notice of default, a 10% increase from the previous month. Lenders repossessed a total of 67,624 homes, a 4% increase from September.
"The October foreclosure numbers continue to show strong signs that foreclosure activity is coming out of the rain delay we've been in for the past year as lenders corrected foreclosure paperwork and processing problems," RealtyTrac Chief Executive James Saccacio said.
Economists said the stepped-up foreclosure pace, which had been long anticipated, will almost certainly put pressure on home prices next year as those actions translate into more discounted homes for sale.
"Within the next couple quarters, or next several months, the share of distressed sales is going to rise," said Celia Chen, a housing analyst for Moody's Economy.com. "That will place a weight on house prices, and I do expect to see more house price depreciation."
The foreclosure crisis accelerated last month in California, with 55,312 homes receiving some kind of foreclosure filing last month. California default notices hit their highest level all year, up 17% from the previous month, with 29,240 default notices filed. Banks repossessed 9,770 California homes last month.
Four metro areas in California took the nation's top four foreclosure spots, RealtyTrac said.
The Stockton area led the pack nationally, with 1 out of every 143 homes in that hard-hit Central Valley region receiving a foreclosure filing, RealtyTrac said. Modesto, the Vallejo-Fairfield area and the Inland Empire followed close behind. Two other metro areas in the Central Valley — Sacramento at No. 7 and Merced at No. 9 — were among the top 10 areas with the highest national foreclosure rates.
All of these inland areas experienced heavy construction during the boom years and now are suffering from a weakened jobs base that is keeping unemployment high.
"They got vastly overbuilt during the housing boom, and the economic fundamentals are not as strong as, say, on the coastal areas of California — the economies are much less diverse," Chen said. "There is just not that flood of migrants, or people, who are relocating to the interior parts of California and accepting those two-hour commutes when the coastal markets are more affordable than they were two years ago."
The California cities toppled Las Vegas, which for 22 consecutive months had held the unenviable position of being the nation's foreclosure capital. Sin City took the No. 5 spot last month after a 36% drop in foreclosure activity.
Nationally, total foreclosure activity declined nearly 31% from October 2010, when banks were slowing down after widespread revelations that they were improperly foreclosing on borrowers.
"Through much of this year, major banks have been in limbo in terms of their ability to file new foreclosures; they have had a lot of pressure on them to make sure their foreclosure filing processes are correct and that they are not doing anything illegal," said Guy Cecala, publisher of Inside Mortgage Finance. "A lot of the banks need to play catch-up to try and get things back on track."
Since then, some of the problems surrounding the so-called robo-signing scandal have come closer to resolution. Last week, under orders from federal regulators, 14 mortgage servicers began mailing out 4.3 million letters to potential victims of wrongful foreclosure practices.
The letters will invite borrowers to submit their cases for a free review by independent consultants that are funded by the lenders but vetted by regulators.
A separate effort by state attorneys general to reach a settlement with the nation's five largest banks remains ongoing. Those negotiations continue even though some states have voiced concern over the direction of the talks; California has dropped out of them altogether, although some analysts view the Golden State's participation in any settlement by the states as critical.
Activist groups in recent weeks including MoveOn, Credo Mobile, Alliance of Californians for Community Empowerment and protesters taking part in the Occupy Wall Street movement have called on the states to reject the current deal with the banks. California Atty. Gen. Kamala Harris, because of California's linchpin position, has attracted considerable attention from the groups.
"While people are out in the street marching on the banks, the real action is going on in the offices of California's Department of Justice," read a statement issued last week by Becky Bond, the political director of Credo. "California is ground zero for the housing crisis, and our attorney general, Kamala Harris, has a special responsibility to punish the bankers who drove our economy off a cliff."
Harris has not spoken publicly on the matter since bowing out of the talks.
The new foreclosure data reported by RealtyTrac come as the housing market begins to show new signs of weakness, with prices falling in 3 out of 4 metropolitan regions in the third quarter, according to a separate report by a real estate trade group. The report published Wednesday by the National Assn. of Realtors showed 111 out of 150 metro areas posted price declines in the third quarter over the same period last year.
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