The number of U.S. homes in some stage of foreclosure fell last month to a 36-month low, as lenders delayed taking action against homeowners amid heightened scrutiny over banks' handling of home repossessions.
Foreclosure-related notices sent to homeowners in February tumbled 14 percent from January and 27 percent versus the same month last year, foreclosure listing firm RealtyTrac Inc. said Thursday.
Initial default notices, scheduled foreclosure auctions and homes repossessed by lenders all posted declines in February.
While severe winter weather was likely a contributing factor, the sharp drop-off in foreclosure-related notices was primarily due to lenders taking a more measured approach to their foreclosure processes since the industry came under fire last year.
State and federal officials launched investigations last fall into foreclosure procedures used by mortgage servicers and lenders after evidence surfaced that some major banks pushed through hundreds of foreclosures a day without giving many borrowers a fair shot at keeping their homes.
Several large banks, including Bank of America, Citigroup and JPMorgan Chase, have been in talks to settle a probe launched by 50 state attorneys general over their handling of foreclosures.
Many lenders temporarily froze foreclosures last October while they reviewed and, in some cases, re-filed foreclosure documents. That process has continued this year, but in less-than-speedy fashion due to backed-up court dockets and other procedural road bumps.
Initial default notices fell 16 percent from January and 41 percent from a year ago, while scheduled foreclosure auctions declined 10 percent versus last month and 21 percent from February last year, RealtyTrac said.
Meanwhile, lenders repossessed 64,643 homes last month, down 17 percent from January and 18 percent from the same month last year. Repossessions declined 35 percent in states where courts play a role in the foreclosures process.
The decline in foreclosure notices has slowed not only the pace of homes lost to foreclosure, but also stemmed the tide of additional properties potentially at risk for repossession.
That's good news for homeowners in trouble, but it's unlikely to portend fewer foreclosures in the long-run.
"The issue isn't whether we'll see the repossessions — it's when," says Rick Sharga, a senior vice president at RealtyTrac.
Should the foreclosure process slowdown continue for several months, it's likely foreclosure notices and bank repossessions will remain artificially low, Sharga says.
That could help stem home price declines and the number of homes taken back by banks, which hit a high of more than 1 million last year.
Such a reprieve would only be temporary, however.
"Even though foreclosure activity would look better, it would take the housing market and the economy longer to recover," Sharga said. "We might not see the market come back until 2014 or 2015."
However, if banks' foreclosure paperwork issues get resolved sooner, rather than later, foreclosure activity is likely to spike again, Sharga added.
About 2 million U.S. households are in foreclosure proceedings. In addition, around 5 million borrowers are at least two months behind on their mortgages, and experts say more people will miss payments because of job losses and loans that exceed the value of the homes they are living in.
All told, 225,101 U.S. homes received at least one foreclosure-related notice in February, or one in every 577 households, RealtyTrac said. The firm tracks notices for defaults, scheduled home auctions and home repossessions — warnings that can lead up to a home eventually being lost to foreclosure.
RealtyTrac's data captures new foreclosure-related filings on a given property, not repeat filings. As a result, some 70,000 notices that mortgage servicers re-filed on properties in some stage of foreclosure were excluded from February's data.
Factor in those re-filed notices, and the month's foreclosure activity comes closer to the monthly rate seen last year before the banks' foreclosure documentation problems came to light.
At a state level, Nevada posted the nation's highest foreclosure rate for the 50th consecutive month in February, with one in every 119 households receiving a foreclosure notice.
Arizona had the No. 2 spot, while California held the third-highest rate of foreclosure.
Rounding out the top 10 states with the highest foreclosure rate in February were: Utah, Idaho, Georgia, Michigan, Florida, Colorado and Hawaii.