Realty Trac released their latest report on foreclosure activity. They use the term “mixed” to describe the results. While that is generally true, the real story is found in the states where the cities in the report are located.
Those cities showing increases in foreclosure activity are located in “Judicial Foreclosure” states. Included were Pennsylvania, New York, North Carolina, Virginia and Indiana. These states had cities showing increases from 22% to 49%. A big jump.
The cities posting much lower foreclosure activity are all in “Non-Judicial Foreclosure” states. These include Nevada, Utah, California and Massachusetts. That being said, California cities still occupy many of the top spots on the list of most active cities for foreclosures. The Riverside-San Bernardino area is still plagued with the highest foreclosure rate in the nation, but even it’s activity level is down relative to the same period in 2011.
“Judicial Foreclosure” means basically that a court order is required to foreclose. Waiting for court dates, preparing the necessary documents and the legal process itself can take more than a year to complete.
“Non-Judicial Foreclosure” essentially means that the borrower grants title back to the lender, at the initial closing of escrow, as collateral for the loan. No court appearance needed. They just notify you that they are going to foreclose if you don’t bring the loan current. That process can be completed in less than 45 days.
The whole robo-signing scandal put a damper on foreclosure activity primarily in those states that require a court appearance by a lender-plaintiff, to prove that they actually have the legal standing to foreclose on a property. Lenders in these states had to virtually stop doing foreclosures unless they could verify that they had the proper documentation required by the court.
Essentially the states that do not require a court hearing, about 26 states in all, have proceeded with foreclosures and continued to move the pipeline along. Thus their foreclosure rates have leveled out or are trending downward, even though they may still be among the highest in the nation. Those states who have played a part in the robo-signing controversy will see the expected uptick in foreclosure activity, as the banks go back to “business as usual” to move a large backlog of pending foreclosure filings.
Locally, markets are impacted by this activity in different ways. Some counties are in highly desirable areas, nearer to better paying jobs, and those will likely work through foreclosures much faster than less desirable areas. Within any given state, there are counties that are seeing foreclosure rates increase, while others are seeing their foreclosure numbers (finally) trending downward. Different local areas tend to be at varying places in their foreclosure cycle.
This is why it’s important to look beyond the surface news reports, and understand what is going on in your little corner of the world. ***
Donna S. Robinson is a 16 year veteran of the real estate industry and a staff writer for Realty Biz News. She is an active real estate investor who also provides coaching and consulting services to individual investors, investment companies, real estate agents and brokers. You may join her email list on her website at www.RealtyBizConsulting.com