LOS ANGELES — The number of homes receiving a foreclosure-related notice fell to a 36-month low last month, as lenders delayed taking action against homeowners because of heightened scrutiny over banks' handling of home repossessions.
Some 255,101 properties received at least one foreclosure-related notice in February, down 14% from January and down 27% from the same month last year, foreclosure listing firm Realty Trac said Thursday.
The firm tracks notices for defaults, scheduled home auctions and home repossessions — warnings that can lead to a home eventually being lost to foreclosure.
While severe winter weather was likely a contributing factor, the sharp drop 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% from January and 41% from a year ago, while scheduled foreclosure auctions declined 10% versus last month and 21% from February last year, Realty Trac said.
Meanwhile, lenders repossessed 64,643 homes last month, down 17% from January and 18% from the same month last year. Repossessions declined 35% 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 Realty Trac.
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.
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.
Realty Trac'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.
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