Fewer Americans had their homes repossessed by banks or were put on notice for being behind on their mortgage payments in April compared to a year ago.
That would ordinarily suggest improving fortunes for U.S. homeowners, but the decline had less to do with any turnaround in the housing market than with foreclosure processing delays that appear to be getting worse. That is threatening to drag out a housing recovery, foreclosure listing firm RealtyTrac Inc. said Thursday.
It's taking longer for lenders to move against homeowners who have stopped paying their mortgage and to take back homes already in some stage of the foreclosure process. In states like New York, for example, it now takes an average of more than two years for a home to go from the initial stage of foreclosure to being repossessed by a bank, the firm said.
Those delays, partly due to banks working through foreclosure documentation problems that came to light last fall, means it could take many more years for lenders to deal with a backlog of seriously delinquent properties, which numbers up to 3.7 million, by some estimates.
"It's going to take between three to four years just to get those loans into foreclosure at our current pace," said Rick Sharga, a senior vice president at RealtyTrac. "And that doesn't spell good news for the housing market."
Banks repossessed 69,532 homes last month, down 5 percent from March and down 25 percent compared with April of last year, according to RealtyTrac, which tracks warnings sent to homeowners throughout the foreclosure process.
The number of properties receiving an initial notice of default fell to 63,422, down 14 percent from March and down 39 percent from April, 2010.
Homes scheduled for auction for the first time also declined in April, falling to 86,304. That's down 7 percent from March and 37 percent below April of last year.
A weak housing market, sliding home prices and pressure on lenders to give troubled homeowners more time to work out new payment arrangements or loan terms have all contributed to the longer time frame for foreclosures.
Many banks also have taken steps to revisit thousands of foreclosure cases since last fall, delaying the processing of new foreclosures. The logjam has been compounded by court delays in states like Florida, New York and New Jersey, where foreclosures must be approved by a judge.
In the first three months of this year, it took an average of 400 days for a U.S. home to go from receiving an initial notice of default to being foreclosed on, RealtyTrac said.
That's up from an average of 340 days in the same period last year and more than double the 151-day average in the first quarter of 2007.
The delays are even lengthier at the state level. In New York and New Jersey, the foreclosure process took more than 900 days, on average, to run its course in the first quarter — more than three times the average length of time in the first quarter of 2007 for both states.
In Florida, one of the states hardest hit by the foreclosure crisis, the process took an average of 619 days in the first quarter, up from 470 days a year earlier. In the first quarter of 2007, it took an average of 169 days for the process to play out, RealtyTrac said.
Barring a pickup in the pace of foreclosures, it is likely fewer homes will be repossessed this year than in 2010, when lenders took back more than a million, Sharga said.
Despite the drop in foreclosure activity last month, several states continue to have outsized foreclosure rates.
Nevada had the highest foreclosure rate in the nation, with one in every 97 households receiving a foreclosure notice in April. It also bucked the overall national trend, as bank repossessions jumped 23 percent from March and climbed 12 percent from April of last year, RealtyTrac said.
Lenders may have elected to pick up the pace of foreclosures in Nevada to take advantage of brisk foreclosure sales in Las Vegas. In March, sales of previously occupied homes in Las Vegas hit a five-year high, with distressed properties accounting for 69 percent of sales, according to DataQuick.
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