In the second quarter, more homes entered foreclosure than in the same period in 2011 — the first increase since 2009. The $25 billion mortgage settlement earlier this year means banks are processing more foreclosures, which could hurt home prices.
Delinquent borrowers take heed: The number of homes entering foreclosure has picked up after last year's slowdown, when banks were forced to overhaul their foreclosure practices.
Foreclosure-data firm RealtyTrac said 311,010 properties started the foreclosure process in the second quarter, a 9% increase from the previous quarter and a 6% increase from the second quarter of 2011 — the first year-over-year jump since the fourth quarter of 2009. Moreover, the trend was fairly widespread, with 31 states posting year-to-year increases. (Bing: How many foreclosures are there in your area?)
Since the $25 billion mortgage settlement earlier this year, Lenders and servicers are slowly but surely catching up with the backlog of delinquent loans that under normal circumstances would have started the foreclosure last year, according to RealtyTrac. This uptick in foreclosure processing will mean more short sales and bank repossessions later this year and early next year, which will dampen home prices slightly.
Overall foreclosure activity dropped 8.21% from the same quarter in 2011, with more bank repossessions replaced by short sales, or sales in which the banks agree to take less than the debt owed.
For the first half of the year, 1.05 million U.S. properties posted some kind of foreclosure filing – from notice of default to bank repossession — a 2% increase from the previous six months but down 11% from the first half of 2011.
Foreclosure activity, however, did increase from the six-month period a year ago in 20 states, including:
- Indiana: 32% increase
- Pennsylvania: 24% increase
- South Carolina: 23% increase
- Connecticut: 23% increase
- Florida: 23% increase
- Illinois: 22% increase