Defaults Soar 33%, Biggest Monthly Gain in 4 Years
A new wave of foreclosures hit in August, as banks picked up the pace in taking action against home owners who have fallen behind on their mortgage payments, RealtyTrac Inc. reported Thursday.
The number of U.S. homes that receiving an initial default notice rose 33 percent in August from July. That increase represents the biggest monthly gain in four years, according to RealtyTrac.
“This is really the first time we’ve seen a significant increase in the number of new foreclosure actions,” says Rick Sharga, a senior vice president at RealtyTrac. “It’s still possible this is a blip, but I think it’s much more likely we’re seeing the beginning of a trend here.”
The uptick in foreclosure activity follows after months of a slowdown in foreclosures, which started last fall, with banks reviewing foreclosure policies and paperwork after facing lawsuits and criticism over how they processed foreclosures. Some banks even temporarily halted their foreclosures as they more carefully reviewed pending cases. The slowdown was also blamed on court delays in some states.
But some housing experts say the increase in foreclosure activity actually could be good for the housing market. A faster turnaround in foreclosures could help clear the glut of shadow inventory hovering over the market, which many say has caused home values to plummet.
The “bloated foreclosure pipeline now presents the greatest obstacle to a housing market recovery,” said Josh Levin, a Citi analyst. About 3.7 million more homes are in some stage of foreclosure than in a normal housing market, Levin said.
Banks are on track to repossess about 800,000 homes this year — down from more than 1 million last year, Sharga said.
Overall, 228,098 U.S. homes — or one in every 570 U.S. households — received a foreclosure-related notice in August, a 7 percent increase from July. However, that represents a 33 percent decline from August 2010.