Foreclosures Fell Last Year to Lowest Level Since 2007
Foreclosure filings and repossessions fell 33 percent in the U.S. last year to 2.7 million, their lowest level since 2007.
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According to RealtyTrac, one in every 69 homes in the U.S. had at least one foreclosure filing during the year, while 804,000 homes were repossessed — a significant improvement from the peak reached in 2010 when 1.04 million homes were repossessed.
In the past five years, more than 4 million homes have been lost to foreclosure, but though last year’s declines would seem to signal good news for the housing market, much of it is due to processing delays caused by fallout from the robo-signing scandal that broke in late 2010.
Lenders became more cautious in the wake of the robo-signing scandal, taking their time to make sure paperwork was legal and proper, thus creating a backlog in the foreclosure pipeline. As a result, the average time it took to process a foreclosure climbed to 348 days in the fourth quarter, up from 305 days a year earlier.
That means most homes that entered into the foreclosure process last year won’t be repossessed until this year. Brandon Moore, chief executive officer of RealtyTrac, said there were “strong signs” during the second half of 2011 that lenders were working through foreclosure backlogs, which means 2012 will likely see a rise in repossessions, though they will likely remain below the peak hit in 2010.
However, low mortgage rates also contributed to the decline in foreclosure activity as they helped many borrowers refinance into more affordable loans, said Moore. The government also helped with its Home Affordable Refinance Program, or HARP, hich made refinancing easier for borrowers who owed more than their homes were worth.
Government foreclosure prevention programs have started about 5.5 million mortgage modifications since April 2009, according to the U.S. Department of Housing and Urban Development.
Programs like HARP and the Home Affordable Modification Program, or HAMP, “have definitely made a dent in the foreclosure problem,” said Moore. “However, they are certainly not living up to their billing of preventing several million foreclosures. In addition, many [HAMP] homeowners fall back into foreclosure later on.”
Declining home prices were also to blame, as they robbed homeowners of home equity that could be tapped for emergency cash.
The highest rates of foreclosures remained mostly in the “bubble states,” where speculative investors artificially drove up home prices beyond their fundamental values during the housing boom. Nevada remained number one for the fifth straight year in terms of foreclosure activity, with one in every 16 households receiving some kind of default notice during the year.
Arizona came in second with California following in third. Florida fell to seventh behind Georgia, Utah, and Michigan.
Las Vegas suffered from the highest foreclosure rate among metro areas, while California put seven cities in the top 10, including Stockton in the number two spot. The top 10 is rounded out by Phoenix in sixth and Reno in eighth.
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