During December, the amount of foreclosure filings declined 2%, according to statistics released today from RealtyTrac. This marks the third consecutive month with a decline in foreclosure filings. Though, the December decline is much more modest than November, when foreclosure filings declined 21%. There were 257,747 foreclosure filings in December, while there were 262,339 filings in November. Among the last 22 months, November and December are the only months with fewer than 300,000 foreclosure filings. Despite this apparent improvement in the housing sector, the face value of these statistics do not accurately convey the condition of foreclosures.
The three month decline in foreclosure filings directly correlates to the temporary suspension of foreclosure proceedings. Each of the three largest mortgage lenders, including JP Morgan, Bank of America, and Ally Financial (formerly GMAC), as well as many smaller lenders, suspended foreclosure proceedings in early October to investigate the ongoing robo-signing controversy. Basically, this controversy concerns notary fraud on foreclosure filings. Due to this suspension, the recent declines in foreclosure filings are not due to organic market conditions, but are instead due to technicalities.
An additional factor that has contributed to the three month decline of foreclosure filings involves a different type of foreclosure suspension. While the suspension of foreclosure proceedings due to the robo-signing controversy has ended, most mortgage lenders began another suspension of foreclosure proceedings for the last two weeks of December. However, this suspension was due to the holiday season, as most lenders do each year.
Further, since most lenders did not file foreclosures in the last two weeks of December, the amount of foreclosures in December were actually rather high. If the amount of foreclosures in the first two weeks applied to the entire month of December, there would have been a staggering amount of foreclosures in December. With this reality, the amount of foreclosure filings in January, as well as the entire first quarter of 2011, are projected to sharply escalate.
Perhaps the only reason why foreclosures in January will not be greater than last September, when repossessions hit an all-time high of 347,410 filings, is due to the increased scrutiny that foreclosure proceedings now face. Lenders, consumers, and especially the courts are paying closer attention to the technical aspects surrounding a foreclosure, which could result with a longer processing rate for each foreclosure.
Last Friday, Massachusetts Supreme Court Judge Ralph Grants issued a ruling that voided two foreclosure sales from 2007, due to a failure of the lender (Wells Fargo) to be able to demonstrate ownership. Based on this ruling, foreclosures around the country in recent years may potentially require review and possibly legal action. Additionally, legal action against foreclosures have been made in the following states:
- In October, New York Court of Appeals Chief Judge Jonathan Lippman announced a new rule [.pdf] requiring lawyers to file new paperwork confirming the accuracy of information for foreclosure cases.
- In November, Florida Supreme Court Chief Justice Charles Canady issued a memorandum [.pdf] to Florida’s 20 judicial circuits ordering all of the state’s foreclosure proceedings to be public information.
- In December, Arizona Attorney General Terry Goddard filed a lawsuit against Bank of America for deceiving consumers in foreclosure proceedings.
- Also, all fifty attorneys general, as well as the AG in DC, formed a bipartisan commission in October to investigate fraudulent practices from mortgage lenders during foreclosure proceedings.
Clearly, the legal attention surrounding foreclosure proceedings is nationwide. Particularly with the recent ruling in Massachusetts, consumers may be more willing to challenge not only current foreclosures, but also past foreclosures.
Depending on whether consumers decide to challenge such proceedings, the amount of foreclosures throughout 2011 may decline. There were more foreclosure filings, as well as bank repossessions, in 2010 than any other year on record, with a total of 3,825,637 and 2,871,891, respectively.