What Pushed Down Foreclosures in 2012?
Lenders repossessed fewer homes in 2012 than in the previous year, pursuing alternatives to foreclosures following government mortgage settlements with large U.S. banks and harsher state laws.
RealtyTrac’s year-end Foreclosure Market Report for 2012 showed that foreclosure filings, including default notices, scheduled auctions, and bank repossessions, were made on a total of 1.8 million properties last year, down 3 percent from 2011 and more than 36 percent from a 2010 peak of 2.9 million properties.
Since 2010, when courts determined that banks had violated foreclosure laws, the rate of foreclosures has been on the decline. As TheStreet reported, the moratorium on foreclosure activity that followed the ruling and the new servicing standards that were set in place after the five largest mortgage lenders in the United States — including JPMorgan Chase (NYSE:JPM), Bank of America (NYSE:BAC), and Citigroup (NYSE:C) — settled with the federal government in early 2012 made it more difficult for banks to foreclose…
RealtyTrac found too that banks have made fewer foreclosures in states that require a judicial foreclosure process, in which the lender must prove that the borrower is in default in order to foreclose. As a result, state courts are backlogged and the length of foreclosure proceedings often lasts several years.
But, despite these trends, filings still increased in 25 states, including 20 that use judicial foreclosure proceedings, with New Jersey, Florida, Connecticut, Indiana, Illinois, and New York experiencing the greatest increase.
After hitting a 57-month low in May 2011, the number of homes in foreclosure has climbed. However, the foreclosure inventory remains below its peak of 31 percent, and the lower quantities may have contributed to higher housing prices this year, according to the report.
Unfortunately, 2013 may not see the same decrease in foreclosures. RealtyTrac Vice President Daren Blomquist said, “We expect to see continued increases in judicial foreclosure states near the beginning of the year as lenders finish catching up with the backlogs in those states, and another set of increases in some non-judicial states near the end of the year as lenders adjust to the new laws and process some deferred foreclosures in those states.”
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