Banks Adjust to New Foreclosure Restrictions amidst Rising Home Seizures

By Stevie Duffin Updated on 12/14/2012

By Daniel Duffield

Last month, the recollection of U.S. homes increased 5.4%, constituting the first annual increase in the past two years, with lenders attempting to navigate the inventory of distressed homes while maintaining the momentum of the housing recovery movement, according to RealtyTrac.

In November, banks reclaimed 59,134 properties, rising from the November 2011 figure of 56,124, according to the report from the Irvine, California data firm. This rise comprises the first since October 2010, corresponding to the decline of foreclosures amidst accusations of lender fraud and faulty practices. Compared with October 2012, these recollections rose 11%.

Daren Blomquist, vice president of RealtyTrac, stated that many lenders have begun to grow more comfortable with foreclosure procedures in an age of careful scrutiny, creating a much more natural flow of foreclosures.

In February, the top five lenders settled a $25 billion suit of charges against fraudulent foreclosures and have since resorted more to short sales, in which borrowers take responsibility of selling the property for less than owed on the mortgage. Since March, statistics have demonstrated sluggish rates for repossessions, decreasing to less than 60,000 monthly, which has been considered a satisfactory level, according to Blomquist.

During the peak of 2010, banks seizures averaged 87,542 homes per month, edging toward the record 1.05 million foreclosures, indicated RealtyTrac data.

In response to these measures, lenders have begun to adapt to these restrictions that have considerably slowed recollections, including a Nevada law which impedes the filing of initial default notices. Accordingly, lenders can now better estimate the overhang of distressed properties, said Blomquist. Additionally, Blomquist added that the reelection of President Obama has eliminated some of the uncertainty which has loomed over the U.S. housing market.

According to Blomquist, “with the political environment less charged, I don’t think we’ll see another spate of laws holding lenders accountable, and there won’t be these bank-owned homes dragging down the market to the extent they have in the past.”

The issuance of default, auction, and repossession notices declined 19% in November from the previous year, constituting the 26^th consecutive month with a yearly decrease, a ReatlyTrac report revealed, with approximately one in every 728 households receive notices.

At the state level, home seizures increased in 29 states, as well as the District of Columbia. Figures revealed that Indiana contained the most seizures at 96%, followed by 88% in Arkansas, and 87% in Missouri. In 21 states, these repossessions declined, falling most substantially in Nevada at 64%, 58% in Oregon, and 49% in Massachusetts, according to RealtyTrac.

Statistics also demonstrated that Florida had the highest rate of foreclosure, with one in every 304 households facing this issue, rising 3% from the previous month and a notable 20% from a year prior. Following Florida, Nevada had a rate of one in 390 households, followed by Illinois with one in every 392 households, showed RealtyTrac data.