A flood of 1.6 million foreclosures backlogged during the 18 month period following the will soon make their way onto local markets, in the wake of the multi-state attorneys general settlement signed in March. As new processing standards that comply with the agreement are developed lenders already are moving ahead to foreclose on homes that have been in default for months
First-time foreclosure starts, either default notices or scheduled foreclosure auctions depending on the state's foreclosure process, increased 7 percent from February to March, the third straight monthly increase. Foreclosure starts in March exceeded 100,000 for the first time since November 2011, although they were still down 11 percent from March 2011, RealtyTrac reported today.
"The low foreclosure numbers in the first quarter are not an indication that the massive reservoir of distressed properties built up over the past few years has somehow miraculously evaporated," said Brandon Moore, chief executive officer of RealtyTrac. "There are hairline cracks in the dam, evident in the sizable foreclosure activity increases in judicial foreclosure states over the past several months, along with an increase in foreclosure starts in many judicial and non-judicial states in March. The dam may not burst in the next 30 to 45 days, but it will eventually burst, and everyone downstream should be prepared for that to happen — both in terms of new foreclosure activity and new short sale activity."
Dramatically different foreclosure pictures are emerging in judicial states, which require a court order to foreclose, and non-judicial states. The 24 non-judicial states, along with the District of Columbia, had 329,854 properties with foreclosure filings during the quarter, more than half the national total — but a decrease of 8 percent from the previous quarter and a decrease of 28 percent from the first quarter of 2011.
Twenty non-judicial states registered year-over-year decreases in foreclosure activity, led by Arkansas, with a 79 percent drop, and Nevada, with a 62 percent drop. Recent legislation or court cases have disrupted the normal foreclosure process in both these states. Other non-judicial states with substantial year-over-year decreases in foreclosure activity included Washington (down 55 percent), Arizona (down 41 percent), Texas (down 31 percent), and California (down 21 percent).
Meanwhile foreclosure activity increased in states that primarily use the judicial foreclosure process. These 26 states combined accounted for 243,074 properties with foreclosure filings during the quarter, an increase of 8 percent from the previous quarter and an increase of 10 percent from the first quarter of 2011.
Judicial states posting some of the biggest year-over-year increases in foreclosure activity in the first quarter included Indiana (up 45 percent), Connecticut (up 38 percent), Massachusetts (up 26 percent), Florida (up 26 percent), South Carolina (up 26 percent), and Pennsylvania (up 23 percent).
Nevada foreclosure activity decreased 26 percent from the previous quarter and was down 62 percent from the first quarter of 2011, but the state still posted the nation's top foreclosure rate — one in every 95 Nevada housing units had a foreclosure filing during the first quarter. Although Nevada had the top foreclosure rate for the quarter, the state's foreclosure rate slipped to second highest among the states in March, after 62 consecutive months in the No. 1 spot. Arizona's foreclosure rate was the nation's highest state foreclosure rate in March.
Although California default activity increased from February to March — up 14 percent — the state's overall foreclosure activity in the first quarter was down on a quarterly and annual basis. The California foreclosure rate still ranked second highest among all states in the first quarter, with one in every 103 housing units with a foreclosure filing.
One in every 106 Arizona housing units had a foreclosure filing in the first quarter, the nation's third highest state foreclosure rate. Arizona foreclosure activity during the quarter was down 4 percent from the previous quarter and was down 41 percent from the first quarter of 2011.
Other states with foreclosure rates ranking among the top 10 in the first quarter were Georgia (one in 119 housing units with a foreclosure filing), Florida (one in 123), Illinois (one in 141), Michigan (one in 162), Colorado (one in 191), Utah (one in 198) and Wisconsin (one in 206).
California's 133,245 properties with foreclosure filings in the first quarter was the highest total of any state and accounted for 23 percent of U.S. foreclosure activity during the quarter.
Florida posted the second highest state total, with 73,344 properties with foreclosure filings during the quarter. Florida foreclosure activity in the first quarter increased 4 percent from the previous quarter and was up 26 percent from the first quarter of 2011.
Illinois foreclosure activity increased 17 percent from the previous quarter and was up 14 percent from the first quarter of 2011, helping the state post the nation's third highest state foreclosure total in the first quarter: 37,660 properties with foreclosure filings.