Foreclosure-related filings were up 5 percent in October from the previous month and 25 percent from one year earlier, data aggregator RealtyTrac said today, despite declines in filings in some states that have passed laws intended to slow the foreclosure process down.
RealtyTrac said Nevada, Arizona and Florida had the highest rate of foreclosure-related filings, which include default notices, auction sales and bank repossessions.
One in 74 Nevada homes were subjected to foreclosure-related filings in October — more than six times the national average of one in 452 homes — as filings rose 11 percent from the previous month, RealtyTrac said.
Arizona saw a 35 percent increase in foreclosure filings from September, with one in 149 homes subject to a notice. One in 157 homes in Florida were subjected to foreclosure-related filings, up 13 percent from September.
Rounding out RealtyTrac’s list of the 10 states with the highest rate of foreclosure-related filings were California, Colorado, Georgia, Michigan, New Jersey, Illinois and Ohio.
Four California markets — Stockton, Merced, Riverside-San Bernardino and Modesto — were among the 10 metro areas with the highest foreclosure rates in October. But that was down from at least six California markets in previous months. Four Florida metro areas were in the top 10: Cape Coral-Fort Myers, Miami, Fort Lauderdale and Orlando.
Not all homes subjected to a foreclosure-related filing are repossessed by banks, as some borrowers are able to refinance their mortgages, or negotiate loan modifications, workouts or short sales with lenders.
Although California had the fourth-highest rate of foreclosure filings — one per 231 homes — RealtyTrac registered an 18 percent decrease in the raw number of filings, which the company attributed to a new law requiring that lenders contact borrowers at least 30 days before filing a notice of default.
California continued to account for the greatest number of filings — 56,954 — down from a peak of more than 100,000 foreclosure-related filings in August, RealtyTrac said.
Another company that tracks foreclosure filings and sales in California, ForeclosureRadar, said the state’s new requirements have "significantly impacted" notice of default filings, which the company said were up 2.8 percent from September to October but down 42.3 percent from a year ago.
But California Senate Bill 1137 was not the reason for a 39.1 percent decrease in sales of foreclosed properties at auctions compared to September, the company’s founder said.
"There were nearly 60,000 properties scheduled for sale at the beginning of October over which the law had no affect," ForeclosureRadar CEO Sean O’Toole said in a statement. The drop in foreclosure sales was probably the result of changes introduced by lenders themselves, he said.
Countrywide Home Loans saw a 460 percent increase in cancellations from September, and a 48 percent decline in the number of properties sold at auction, O’Toole noted.
Other lenders were postponing sales, with the percentage of foreclosure sales that had postponed at least once increasing from 36 percent of sales to 58 percent of sales, ForeclosureRadar reported. The average length of postponement also increased, from 24 days to 42 days.
According to a recent analysis by the law firm K & L Gates, other states that have passed laws intended to slow down the foreclosure process include North Carolina, Maryland and New Jersey. Massachusetts and Connecticut have strengthened borrowers "right to cure" loans that are delinquent or in default, although Connecticut’s law only applies to "nonprime" loans.
RealtyTrac said foreclosure activity in North Carolina was up 29.75 percent from September to October, but down 20.15 percent from a year ago. In Maryland, foreclosure filings were up 32.31 percent from a month ago but down 15.71 percent year-over-year. Foreclosure activity in New Jersey was up 10.64 percent from September and 74.92 percent from a year ago.
Laws in California and other states aimed at slowing down the foreclosure process seem to be having some effect. But some critics wonder whether they will do more harm than good in the long run. In some cases, critics say, slowing down the process may only delay, rather than prevent foreclosures, and could raise the cost of borrowing.
Historically, foreclosure moratoriums tend to discourage lending and may lead to higher interest rates for borrowers, according to an analysis of past research on the topic by David Wheelock, an economist with the Federal Reserve Bank of St. Louis.
At the height of the Great Depression, as many as half of all urban home mortgages were delinquent, and 27 states adopted moratoriums on foreclosures. Studies of the era by contemporary economists found "significant reductions" in the supply of loans in states that enacted such legislation compared to those that didn’t, Wheelock said.
Wheelock also cited a 1982 study that found interest rates were higher in states with lengthy or costly foreclosure processes. A 2006 study found mortgage loans were 3 to 7 percent smaller in states with nonjudicial foreclosure processes — evidence that loans are more scarce in states where foreclosure is more costly, Wheelock said.
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