Lenders freeze foreclosures as they reach record levels

by Broderick Perkins
DeadlineNews Group

(10/18/2010) Erate.com Exclusive - Foreclosures hit a single-month record 0f 102,134 disclosures in September, as mortgage lenders scrambled to respond to charges about questionable foreclosure procedures.

Nearly a half dozen lenders temporarily froze foreclosures in virtually every state to look for filing infractions as RealtyTrac reported nearly a million foreclosure filings for the third quarter ending in September.

Foreclosure filings - default notices, scheduled auctions and bank repossessions - 930,437 of them, increased 4 percent from the second quarter, but were down 1 percent from the third quarter in 2009.

"Lenders foreclosed on a record number of properties in September and in the third quarter, taking a bite out of the backlog of distressed properties where the foreclosure process was delayed by foreclosure prevention efforts over the past 20 months," said James J. Saccacio, chief executive officer of RealtyTrac.

"We expect to see a dip in those bank repossessions — and possibly earlier stages of the foreclosure process — in the fourth quarter as several major lenders have halted foreclosure sales in some states while they review irregularities in foreclosure-processing documentation that has been called into question in recent weeks," he added.

A state level joint investigation headed by Iowa Attorney General Tom Miller is review how lenders verify foreclosure documents. States have already started examining whether mortgage servicers have submitted improper affidavits or other foreclosure documents.

States are investigating charges that employees dubbed "robo-signers" had vouched for the accuracy of foreclosure documents without reading them, among other infractions.

Along with the Bank of America, PNC Financial Services Inc., Ally Financial's GMAC Mortgage and JPMorgan Chase recently halted foreclosures in some states amid evidence employees or legal staff signed foreclosure documents without verifying information.

California's Attorney General Edmund G. Brown called on all lenders in California to halt foreclosing on California homes until lenders can demonstrate that they are complying with state law. Brown has sent letters to Ally Financial and J.P. Morgan Chase directing them either to prove they are in compliance with state law or stop foreclosures. His office also has been in discussions with other lenders, including Wells Fargo, One West and Bank of America.

U.S. Sen. Christopher Dodd (D-CT), the chairman of the Senate Banking Committee, recently said he would hold a hearing on the matter in November.

Dodd told the Associated Press, "American families should not have to worry about losing their homes to sloppy bureaucratic mismanagement or fraud."

RealtyTrac reported


foreclosure activity in the 24 judicial foreclosure states most affected by the foreclosure documentation issue accounted for 40 percent of all foreclosure activity in the third quarter and 36 percent of bank repossessions, or REOs.

That means another monthly foreclosure record is likely.

"If the lenders can resolve the documentation issue quickly, then we would expect the temporary lull in foreclosure activity to be followed by a parallel spike in activity as many of the delayed foreclosures move forward in the foreclosure process," Saccacio said.

Or worse.

"However, if the documentation issue cannot be quickly resolved and expands to more lenders we could see a chilling effect on the overall housing market as sales of pre-foreclosure and foreclosed properties, which account for nearly one-third of all sales, dry up and the shadow inventory of distressed properties grows — causing more uncertainty about home prices," Saccacio said.

As it has for the past 15 quarters, Nevada continued to document the nation's highest state foreclosure rate in the third quarter of 2010 despite a year-over-year decline in foreclosure activity. One in every 29 Nevada housing units received a foreclosure filing during the quarter, almost five times the national average.

Arizona, at No. 2 for the fifth consecutive quarter, posted a one-in-every-55-housing units level of homes receiving a foreclosure filing.

Florida was third, with one in every 56 housing units receiving a foreclosure filing.

California, Idaho, Utah, Georgia, Michigan, Illinois and Hawaii also had high rates of foreclosures, according to RealtyTrac.

Other related articles:

BofA halts foreclosures, states investigate

Foreclosures sell at 26 percent discount, comprise 24 percent of all sales

More than one in three say it's OK to walk away from mortgage

Foreclosures Coming Onto the Market Still Under Tight Control

Mortgage Defaults Down While Foreclosures Rise