Lenders Still Cleaning House on Troubled Loans

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IRVINE, CA—A slight rise in US residential foreclosure filings for the first time in three years indicates that lenders are pushing through lingering non-performing loans, says RealtyTrac's VP Daren Blomquist in a new report. The firm says foreclosure filings were up in the third quarter .42% from the previous quarter—the first quarterly increase since the third quarter of 2011—although this figure was down 16% from a year ago.

The quarterly increase in overall foreclosure activity was driven by a 2% increase in default notices and a 7% quarterly increase in scheduled foreclosure auctions, RealtyTrac reports. Meanwhile, bank repossessions decreased 12% from the previous quarter.

Looking at just the month of September, the number of foreclosure filings was down 9% from the previous month and down 19% from a year ago to the lowest level since July 2006, which represents a 98-month low. September marked the 48^th consecutive month where US foreclosure activity decreased on a year-over-year basis.

Blomquist says, “September foreclosure activity was back to pre-housing-bubble levels nationwide, in large part thanks to a continued slide in bank repossessions. However, a recent rise in scheduled foreclosure auctions in many markets across the country shows lenders are continuing to clean house of lingering delinquent loans. The rise in scheduled auctions foreshadows a corresponding rise in bank repossessions and auction sales to third-party buyers in the coming months.”

Regarding whether we can expect this upward trend in foreclosures to continue, Blomquist tells GlobeSt.com, “In the near term, the rise in scheduled foreclosure auctions does indicate that we will see a rise in bank repossessions and auction sales to third-party buyers in the coming months, but as banks work through the backlog it's likely that we will see a decline in foreclosures in early 2015. After nearly four years of falling foreclosures, we are starting to see evidence that foreclosure numbers are normalizing at the national level.”

Blomquist adds that back in 2006 before the housing bubble burst and the Great Recession hit, we were averaging 85,000 foreclosure filings a month; so far this year the average is 113,000 a month. “That's still above that 'normal' level, but it is much closer to normal than it is to the peak of the foreclosure crisis in 2010, when the average was 319,000 foreclosure filings a month.”

Despite the surprising foreclosure findings, overall the housing recovery is continuing in most markets. As GlobeSt.com reported earlier this week, the firm has released a 2014 Election Housing Scorecard report analyzing the health of local housing markets in more than 1,500 counties nationwide compared with two years ago and predicting US Senate race outcomes based on the results. A total of 52% of all those analyzed were categorized as better off compared to two years ago, while 11% fell into the worse-off category and 36% were categorized a toss-up. A total of 50% of the total population in all housing markets analyzed for the report were in the better-off category, while 9% were in the worse-off markets and 41% were in the toss-up pile.

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