By Mike Colpitts
Foreclosure filings dropped 2% in May as banks and mortgage servicing companies experienced turmoil as a result of legal problems dealing with foreclosures. Filings fell a third from a year ago.
Formal foreclosure auctions, the last step in the painful foreclosure process, however, were scheduled against 89,251 U.S. residential properties during the month, an increase of 3% from April, according to Realty Trac. May’s monthly increase followed eight consecutive monthly decreases in scheduled auctions.
Since the robo-signing scandal came to light nine months ago bank repossessions have followed a roller-coaster ride of activity with five monthly drops and three increases.
“Activity spiked in May for various stages of the foreclosure process in some states, a pattern that has occurred in several states over the past few months,” said Realty Trac CEO James Saccacio. “This pattern provides evidence that lenders are somewhat unevenly pushing batches of bad loans through foreclosure as they overhaul their paperwork and documentation procedures, and as they determine that some local markets are able to absorb more foreclosure inventory.”
Banks and mortgage servicing companies are holding back on listing homes for sale, fearing that the surplus inventory of foreclosed properties could damage the market and pressure home prices in the majority of the country to move even lower.
Notices of default, the first stage in the foreclosure process were filed for the first time against 58,797 properties in May, representing a 7% decline from the previous month.
Nevada posted the nation’s highest foreclosure rate for all states for the 53rd consecutive month. Nearly one in every 103 residential units received a foreclosure filing notice of some type during the month, but formal foreclosures were down 21% in the state from the record high in April.
Formal foreclosure auctions increased 4% in May over April in Arizona to maintain the country’s second highest foreclosure rate. California posted the nation’s third highest state foreclosure rate with one in every 259 housing units getting a foreclosure filing of some sort during the month.