NC housing foreclosures drop sharply in May from year ago

Posted June 16, 2011

— Housing foreclosure activity declined sharply across North Carolina in May by 38.3 percent compared to a year ago, foreclosure listing firm RealtyTrac reported Thursday.

The numbers were down 3.4 percent from April to a total of 2,689 properties.

Nationally, foreclosure activity also slowed, dropping to the lowest numbers since 2006. The decline was the second consecutive month of fewer actions.

RealtyTrac attributed the decline to a slowing housing market and lingering delays in banks' foreclosure process.

In North Carolina, 354 property owners were notified about being in default.

Another 1,538 properties were listed for sale.

Some 797 properties were reclaimed by a bank or lender.

North Carolina, the 10th largest state, ranked 36th in foreclosure actions.

Mortgage lenders are still working through foreclosure documentation problems that surfaced last fall.

The delays continue to push the 2 million U.S. homes already on banks' books or in some stage of foreclosure further into limbo and put banks on track to repossess about 200,000 fewer homes this year than in 2010, the firm said.

"The problem with that, even though it sounds better, is that all of those foreclosure auctions we should have seen this year roll into next year, and that means it's going to take that much longer for the housing market to recover," said Rick Sharga, a senior vice president at RealtyTrac.

The pace of homes entering the foreclosure process and those ending up as bank-owned properties began slowing sharply last fall, when allegations surfaced that many banks relied on erroneous documents when they foreclosed on thousands of homes.

Since then, banks, federal regulators and state attorneys general have been reviewing how foreclosures were carried out the past two years. That has prompted lenders to resubmit paperwork on foreclosures and, in states where courts play a role in the process, caused a logjam of foreclosure cases.

Lenders also have put off on taking action against delinquent borrowers as U.S. home sales have slowed this year.

In many cases, banks are only going forward with the foreclosure process as quickly as they can sell the properties they already have on the market, Sharga said.

Banks have almost 900,000 properties already on their books, so if the ones on the market aren't selling, there's little incentive for them to take back more homes that will end up sitting vacant.

Combined with the 1.1 million homes in some stage of foreclosure, the properties represent more than three years of housing inventory at the current sales pace — and that's if no other homes go into foreclosure.

The backlog spells further declines in home values, as homes in foreclosure sell at a 20 percent discount on average, and those discounts erode prices throughout a neighborhood.

One bright spot is that the number of home loans that are at least 90 days late has fallen five quarters in a row and are at the lowest level since the start of 2009, according to the Mortgage Bankers Association.

That's partly because loans made in the aftermath of the credit crisis, when lenders tightened underwriting standards, are not becoming delinquent as often as riskier loans made between 2005 and 2007. That means fewer of those loans are likely to into foreclosure.

In all, 214,927 properties received a notice of default, scheduled home auction or home repossession in May, down 2 percent from April and down 33 percent from May last year, RealtyTrac said.

That represents one in every 605 U.S. households. The notices can lead up to a home eventually being lost to foreclosure.

The number of homes receiving an initial notice of default fell to 58,797, the lowest level since December 2006. The notices fell 7 percent from April and 39 percent from a year earlier, the firm said.

Underscoring the scope of the foreclosure delays, initial notices of default, which mark the start of the foreclosure process, have posted annual declines the past 16 months, even though there are some 4 million U.S. homeowners who are at least three months behind on their mortgage. Ordinarily, most of them would already be in foreclosure.

The pace of bank repossessions slowed in May to 66,879 properties, down 4 percent from April and down 29 percent from May 2010, the firm said. In the past eight months, bank repossessions have posted three annual increases and been down the other five.

Still, lenders did take back more homes last month in several states, including Georgia, New York, Virginia, New Jersey and Michigan.

Going by the pace of home repossessions so far this year, Sharga estimates banks will take back 800,000 homes this year, down from more than 1 million last year.

Despite the drop in foreclosure activity last month, several states continue to have outsized foreclosure rates.

Nevada led the nation, with one in every 103 households receiving a foreclosure notice in May. Bank repossessions fell 21 percent from April, but initial notices of default rose 8 percent.

Rounding out the top 10 states with the highest foreclosure rate in May are Arizona, California, Michigan, Utah, Georgia, Idaho, Florida, Illinois and Colorado.

For more statistics and a state-by-state breakdown of the RealtyTrac data, read here.


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  • rroadrunner99 Jun 16, 2011

    They dropped because the bank's foreclosure officers have writers cramp. They can't fill out the papers as fast now. I think they have enough houses to try to find someone who will take them off their hand's. Good Luck with that.

  • Keepin_it_real_in_NC Jun 16, 2011

    The double dip is coming.

  • drjones74 Jun 16, 2011

    What a racket. Banks get their money back not in 30 years like your term but in more like 15 years. You are getting up the you know what for 15 years for interest. Thats even worse than credit cards and those don't have collateral! So you pay on a house for 20 years, you lose your job, the has made its money back, plus 5 years interest AND gets the house. Utter BS. The whole system. Homebuilders, banks and investors are all in on it.

  • Bill Brasky Jun 16, 2011

    "Right. That is, if you ignore the monetary policy at the time, the role of Fannie/Freddie in creating the market, and half a dozen other factors."

    Harrison... FNMA and Freddie had a very limited role with the foreclosures. Most of the damage was done by the private banks, in fact 93% of the loans that foreclosed were from private banks that were not insured by Freddie or Fannie. Sorry buddy

  • mep Jun 16, 2011

    The longer it takes for banks to foreclose, the longer banks must hold onto "toxic assets". Foreclosed homes generally lower home values. The sooner these foreclosed homes sell, the sooner the housing market in general will recover. But "recover" may be at much lower prices. Just hope the govt keeps out and does not attempt to "stimulate" homes sales by offering special mortgages packages. It was all those special mortgages along with govt backing that got us into this mess. Homeowner, bank, lender, and investor greed... all backed by the full faith and credit of the USA.

  • Rebelyell55 Jun 16, 2011

    Just the calm before the storm.

  • Responsibleforactions Jun 16, 2011

    In another article it stated that the reason for the drop is because the banks are so behind in foreclosure proceeding. Once they start catching up the rates will rise again - too many for them to process timely...seriously, this is bad news

  • atozca Jun 16, 2011

    Mine was postponed from May til July for some reason. I do hope we can secure our home, however, we can't seem to secure income. We have been in our home for 11 years, and had 6 months cost of living in savings when our industry fell out of work (construction). If I didn't have an American mortgage to pay, I could possibly compete in the construction industry now, however, I can't seem to find work anywhere... in any industry.

  • MitziGaynor Jun 16, 2011

    We just had 3 on my street that has 11 houses????

  • Boot-the-DC-Tyrant Jun 16, 2011

    a LOT of people are now living in an apartment or renting.