Markets & Economy

Foreclosure starts surge as lenders start ‘spring cleaning’

Backlog of seriously delinquent loans working its way through system

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The number of homes repossessed by lenders finally dropped to precrisis levels last year, but a surge in properties entering the foreclosure process or headed for the auction block at the end of the year indicates lenders are preparing to do some "spring cleaning" by taking action against hundreds of thousands of delinquent borrowers during the next six months. Lenders took back just 327,069 homes last year -- the lowest annual total since 2006, according to RealtyTrac’s year-end foreclosure market report. At the height of the downturn, 1 million homes a year were going into lenders’ “real estate owned” (REO) inventories. But in the final month of the year, foreclosure starts -- legal notices to homeowners that begin the process of auctioning off or repossessing a home -- were up 14 percent from the year before, to 59,358. Scheduled foreclosure auctions -- the beginning of the foreclosure process in some states -- were also up 7 percent from a year ago during the final...