Lenders are finally starting to process their backlogs of foreclosures, according to recent data from RealtyTrac, but these days, those properties are getting stuck in the process longer.
In the third quarter of this year, foreclosure filings – made up of default notices, scheduled auctions and bank repossessions – rose slightly by 0.3 percent from the previous quarter. While that growth isn’t stellar, it is important as it is the first increase after four consecutive quarterly declines.
First time default notices jumped up the most, rising 14 percent, a sign that banks are now ready to pursue foreclosures more aggressively again. And as strange as it sounds, that could actually be a good thing.
Banks dramatically pulled back on processing foreclosures last fall as the ‘robo-signing’ scandal forced them to take a closer look at their paperwork. That caused major delays and created a huge backlog of foreclosures. And it is widely believed by analysts that the housing market will not truly recover until lenders work through their inventory of foreclosures.
“Banks are beginning to process foreclosures again after taking the time to get their paperwork in order. They’ve done the diligence they needed to do,” said RealtyTrac chief executive, James Saccacio, as quoted in a Reuters article. “Now there’s this wave coming back in and more defaults are being processed.”
So even though foreclosure filings are still down significantly from last year, the fact that they are rising may be good for the housing market in the long run, as it means the recovery process is getting back on track.
It may take a while for foreclosure to be processed as quickly though. RealtyTrac reported that the national average time for a property to be in foreclosure (from first default notice to bank repossession) has risen to 336 days or 11.2 months. In the second quarter is was only 318 days or 10.6 months. That time frame may shrink as banks ramp up their foreclosure machines again.