INCREASED FORECLOSURE SALES ARE SEEN ON THE COURTHOUSE STEPS

Foreclosure sales bounced back to levels not seen since robo-signing moratoriums went into effect last fall. With significant increases in Arizona, California, Nevada, Oregon and Washington; foreclosure sales rose both in terms of properties that went Back to the Bank and those Sold to Third Parties, typically investors.

Key month over month trends for January include:

CLICK HERE for our complete January 2011 Foreclosure Report

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There has been considerable commotion about irregularities in documentation by foreclosing lenders that has lead to more and more delays in the foreclosure process. The conversation gained momentum about the time when an overwhelmed employee in Ally’s GMAC division testified that his team of 13 people signed about 10,000 affidavits a month without verifying the accuracy of the document. Soon thereafter, a Bank of America employee went on record to say that she signed over 7,000 foreclosure documents a month without reading them. Those kind of embarrassments effectively resulted in a national moratorium on foreclosure activity by a number of major lenders, commonly known as the robo-signing foreclosure freeze.

Then came the Massachusetts State Supreme Court in U.S. Bank v. Ibanez in which the court found that the lenders had not properly assigned the mortgages through the securitization process and that the foreclosures were therefore invalid. The implication of that decision could be huge since most mortgages in this county have been securitized requiring multiple and sometimes messy assignments. However, the National impact of the Ibanez case remains to be seen since the decision is not binding outside of Massachusetts, the laws around mortgages and assignments vary from state to state and problems in the assignment chain can likely be corrected after the fact.

The most recent discussion on the impact of poor foreclosure documentation came quietly from a California Appellate Court sitting in Los Angeles where Notice of Default irregularities were brought into question. With simple schoolyard reasoning, the Court in Aceves v. U.S. Bank concluded that while the defaulting homeowner could sue her lender for other reasons, the mere naming of the wrong beneficiary in the Notice of Default was of no legal consequence. The homeowner did not suffer any prejudice as a result of the error in documentation and, absent prejudice she was not entitled to relief.

Now circle back to the Ibanez case, it could be argued that the sloppy assignments didn’t really cause the defaulting borrower any prejudice. One Justice even went so far as to say that there was no dispute that the homeowner had defaulted and the property was subject to foreclosure. Same with robo-signing, the defaulting homeowner isn’t really harmed if the employee processing the foreclosure paperwork doesn’t have the requisite personal knowledge of the facts surrounding the homeowner’s foreclosure so long as those facts are indeed stated accurately. Lenders would argue it’s a matter of substance over form. It’s one thing if the paperwork problem lead to a lender trying to foreclose on a homeowner who is making his payments. But that was not the case in Ibanez nor is it likely to be the case for almost everyone else facing foreclosure. In turn, homeowners have a legitimate expectation that the statutory foreclosure process adopted by their legislative representatives will be followed strictly.  If the foreclosure procedure is too tough for lenders to comply with then they should seek a change in those procedures, not simply ignore them.

There is no single hard and fast rule around the everyday reality of foreclosure errors. Whether the error lies in an improper assignment, an automatically processed affidavit, a slipshod notice of default or something else, these matters will be the subject of many lawsuits to come and over time the courts will give us better guidance as to the significance of each. Ultimately, we remain convinced that common sense will prevail under the likes of Aceves v. U.S. Bank. No free homes for defaulting borrowers, but no free ride for the banks either.

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The first half of 2010 saw relatively good news for most participants in the foreclosure market. Foreclosure cancellations rose as homeowners saw more short sales and loan modifications approved. Investors quickly flipped their foreclosure purchases for solid profits as buyers hurried to take advantage of tax credits. As the tax credits expired, however, the market began to slow. Foreclosure cancellations also began to drop as the government push for loan modifications waned and short sales slowed with the rest of the housing market. Finally, in the beginning of the third quarter, the robo-signing scandal led to dramatically lower foreclosure sales, including a complete halt by Bank of America for nearly two months.

CLICK HERE for our complete 2010 Summary

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FORECLOURE ACTIVITY MIXED AS MORTGAGE SERVICES DEAL WITH THE FALLOUT FROM RECENT DOCUMENTATION ISSUES

While we expect foreclosure activity to bounce around as mortgage servicers deal with the fallout from recent documentation issues, we found this month’s mix of activity particularly strange as most large servicers and foreclosure trustees operate across all of the states we cover. One possible explanation for this mix of activity is that servicers and trustees are dealing with issues specific to each stage of the foreclosure process on a state-by-state basis. This would align with the recent Massachusetts Supreme Court decision that made it clear that lenders must follow the letter of the law in each state rather than simply continue industry practices. This could certainly slow one type of activity while accelerating another.

Key month over month trends for December include:

CLICK HERE for our complete December 2010 Foreclosure Report

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SIGNIFICANT DECLINE IN FORECLOSURE ACTIVITY BROUGHT ON BY ROBO-SIGNING

For the second month in a row, foreclosure activity was impacted by voluntary foreclosure suspensions, after certain practices commonly used during the foreclosure process were called into question. While initially limited to judicial foreclosure states, the so-called robo-signing controversy began impacting foreclosures in non-judicial states, including those in our coverage area in early October.

Key month over month trends for November include:

CLICK HERE for our complete November 2010 Foreclosure Report

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FORECLOSURE SUSPENSIONS CAUSE BIG DROP IN SALES ACTIVITY

The headline foreclosure news in October was the suspension of foreclosures by a handful of lenders, after certain procedures were called into question. While the announcements initially focused on 23 judicial foreclosure states outside of our coverage area, Ally (GMAC), PNC and Bank of America all later announced that they would be suspending foreclosures nationally. The week after the announcements, we saw evidence of those suspensions on Tuesday, October 12; after the Monday holiday. Ally restarted foreclosures just a week later on October 18; but neither Bank of America nor PNC have resumed foreclosure sales as of November 15th.

Foreclosure sales dropped dramatically across our coverage area as a result, though slight declines by other lenders would have likely led to a drop in October’s foreclosure sales regardless. It should be noted that ForeclosureRadar monitors foreclosure sales at the time of the foreclosure auction, providing far more current data than other services which track Trustee’s Deeds that are filed weeks later.

Foreclosure filings were less impacted by the announced suspensions. Filings by Bank of America dropped slightly just after their announcement, but began picking up the following week. PNC appears to have largely stopped new filings, but they typically represent less than 2 percent of filings, so their impact was minimal. Despite the limited impact of announced suspensions, Notices of Default filings were generally down. For State-by-State details, review the table below or click the State links for complete foreclosure data at the State, County, City and ZIP Code levels.

“Despite a short-term impact to foreclosure sales, the latest foreclosure scandal will likely lead to little more than a new scam perpetrated on those who have already lost their home,” says Sean O’Toole, CEO and Founder of ForeclosureRadar.com. “Much like the cottage industry of loan modification consultants that took up-front fees and provided little in return, we are now seeing consultants promising to overturn foreclosure sales, despite any experience in actually doing so.”

Arizona

Notice of Trustee Sale filings dropped 12.6 percent in October from September, and were down 15.0 percent from the prior year. After a steady rise last year, the October inventory of Bank Owned (REO) properties was flat, which was likely helped by the 27.0 percent drop in foreclosures that went Back to the Bank. Properties Sold to a 3rd Party (typically investors), also dropped 26.5 percent in October from the prior month, as foreclosure sales were impacted by the foreclosure suspensions.
View all Arizona stats by state, county, city or ZIP

California

Preforeclosure inventories dropped 11.8 percent in October from the prior month, largely thanks to a 16.8 percent drop in Notice of Default filings. Foreclosure suspensions led to a 29.9 percent decline in foreclosure sales that went Back to Bank (REO), and a 26.4 percent decline in those Sold to 3rd Parties. Despite the significant decline in new Bank Owned (REO) properties, Bank Owned (REO) inventories actually rose, as REO resales continued to slow.
View all California stats by state, county, city or ZIP

Nevada

After a dramatic rise of 39.2 percent in September, foreclosure sales dropped 36.6 percent in October. Thus the impact of suspensions simply brought overall foreclosure sales back to typical levels. That said, the 41.5 percent drop in sales to 3rd Parties (typically investors), brought 3rd Party purchases down to their lowest level since December 2009. Foreclosure filings were also down from September to October, with Notice of Default filings down 13.5 percent and Notice of Trustee Sale filings down 24.8 percent.
View all Nevada stats by state, county, city or ZIP

Oregon

Foreclosure activity was down across the board in Oregon. Notice of Default filings dropped 14.8 percent and Notice of Trustee Sale filings declined a significant 35.8 percent. Foreclosure sales were also down, with properties going Back to the Bank (REO) down 38.2 percent and those Sold to 3rd Parties down 36.5 percent. While new foreclosure activity decreased, the number of foreclosures that were in process also decreased, with Cancellations declining 15.6 percent. This left the inventory of foreclosures Scheduled for Sale only down 4.3 percent, despite the dramatic drop in new Notices’s of Trustee Sale.
View all Oregon stats by state, county, city or ZIP

Washington

Washington was the least impacted by foreclosure suspensions of any state that we cover, with foreclosure sales down just 8.2 percent. Foreclosure sales that went Back to the Bank (REO) declined 10.6 percent, while those Sold to 3rd Parites partially offset that decline with an increase of 21.0 percent. Washington’s Cancellations jumped 49.7 percent from September to October; this bucked the trend among other states that had declining Cancellations for months. Notice of Trustee Sale filings in Washington state increased 1.8 percent.
View all Washington stats by state, county, city or ZIP

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Foreclosure Sales & REO Inventories Rise

Foreclosure sales increased throughout our coverage area in September, as did the inventory of Bank Owned properties. A state by state summary for Arizona, California, Nevada, Oregon and Washington can be found below, and you can drill down to view detailed charts at the state, county, city and zip code level using the provided links.

Five major lenders made announcements last week that they would be suspending certain foreclosure activities in various states. These lenders included Ally (GMAC), JPMorgan Chase, Bank of America, Litton and PNC. While this report is primarily focused on September foreclosure activity, it is important to note that we have yet to see any impact to foreclosure sales within our coverage area through Friday, October 8, 2010 by these lenders. This is not completely unexpected as the majority of these announcements were limited to 23 judicial foreclosure states that do not include Arizona, California, Nevada, Oregon or Washington. We will continue to monitor activity by these lenders and post updates to our blog at ForeclosureTruth.com.

“We regularly see lenders make minor mistakes in foreclosure filings” says Sean O’Toole, CEO and Founder of ForeclosureRadar.com. “But the reality is that far more homeowners are behind on their mortgage payments than are even in foreclosure. The clear problem in the housing market today is not foreclosures, but negative equity; and as long as the focus remains on the symptom rather than the disease we will see little progress towards real solutions and this crisis will drag on for years to come.”

Arizona
The inventory of Bank Owned (REO) properties has been steadily rising for the last year in Arizona, up 4.3 percent from August to September, and 67.9 percent year-over-year. This is partially explained by the increase in foreclosure sales that went Back to the Bank, up 3.1 percent from August, and 61.2 percent from the prior year; with a sharper rise in inventory, as REO resales slowed after the expiration of the tax credit. Notice of Trustee Sale filings dropped for the 2nd month in a row, down 8.9 percent in September and 12.5 percent from a year earlier.
View all Arizona stats by state, county, city or ZIP

California
The number of foreclosures Sold to 3rd parties, typically investors, declined 15.6 percent in September. Most foreclosure investors flip the properties they purchase after taking care of title, occupancy and repairs. This process is taking 44.5 percent longer than it did a year ago, up from 95 days to 137. The number of foreclosure sales that went back to the bank was up 4.9 percent, while the total inventory of Bank Owned (REO) properties increased by 5.3 percent as REO resales slowed. Notice of Trustee Sale filinges declined 17.2 percent while Notice of Default filings were essentially flat with a decrease of 1.9 percent.
View all California stats by state, county, city or ZIP

Nevada
Foreclosure sales jumped dramatically in September, increasing by 39.2 percent from August to September. The number of foreclosure sales purchased by 3rd parties was essentially flat with an increase of just 1.1 percent, while the majority went back to the bank, leading to an 8.0 percent increase in the inventory of Bank Owned (REO) properties. Nevada foreclosures filings were mixed with Notices of Default filings down 8.8 percent and Notices of Trustee Sale filings up 6.5 percent in September.
View all Nevada stats by state, county, city or ZIP

Oregon
Foreclosure sales continue to climb in Oregon, up 18.5 percent from August and 88.9 percent from the prior year to a record 967 sales. The vast majority of these sales, 94.3 percent, failed to receive a bid from a 3rd party and went back to the bank as REO inventory to be resold later. Despite a 16.6 percent drop in the number of Notice of Trustee Sale filings, the number of foreclosures scheduled for sale remained flat, increasing just 0.6 percent, as new filings still slightly outpaced the combination of foreclosure sales and cancellations.
View all Oregon stats by state, county, city or ZIP

Washington
A record 2,007 properties were foreclosed on in September in Washington, up 19.0 percent from August, and 55.2 percent from the prior year. Just 7.3 percent of foreclosures sales were purchased by 3rd party investors, with the remaining going back to the bank increasing the inventory of Bank Owned (REO) properties by 10.9 percent. Notice of Trustee Sale filings dropped for the second month, down 15.2 percent from August, but still up 33.9 percent year-over-year.
View all Washington stats by state, county, city or ZIP

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Commencing January 1, 2011, a notice to terminate a residential tenant who remains in the property after a foreclosure sale must include a statutory notice of the tenant’s rights under newly added California Code of Civil Procedure section 1161c passed pursuant to Senate Bill 1149.  This requirement applies to an immediate successor-in-interest involving any residential foreclosure for one year after a foreclosure sale. The code section mandates that the tenant’s rights be must stated on a separate cover sheet or, alternatively, incorporated into the 90 day notice to terminate. The Notice is to state:

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Notice to Any Renters Living At

[street address of the unit]

The attached notice means that your home was recently sold in foreclosure and the new owner plans to evict you.

You should talk to a lawyer NOW to see what your rights are. You may receive court papers in a few days. If your name is on the papers it may hurt your credit if you do not respond and simply move out.

Also, if you do not respond within five days of receiving the papers, even if you are not named in the papers, you will likely lose any rights you may have. In some cases, you can respond without hurting your credit. You should ask a lawyer about it.

You may have the right to stay in your home for 90 days or longer, regardless of any deadlines stated on any attached papers. In some cases and in some cities with a “just cause for eviction law,” you may not have to move at all. But you must take the proper legal steps in order to protect your rights.

[Or if notice is stated in a 90 day Notice to Quit, the preceding paragraph is to be replaced with the following:

You may have the right to stay in your home for longer than 90 days. If you have a lease that ends more than 90 days from now, the new owner must honor the lease under many circumstances. Also, in some cases and in some cities with a “just cause for eviction law,” you may not have to move at all. But you must take the proper legal steps in order to protect your rights.]

How to Get Legal Help

If you cannot afford an attorney, you may be eligible for free legal services from a nonprofit legal services program. You can locate these nonprofit groups at the California Legal Services Web site (www.lawhelpcalifornia.org), the California Courts Online Self-Help Center (www.courtinfo.ca.gov/selfhelp), or by contacting your local court or county bar association.

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CCP Section 1161c sunsets on January 1, 2013.

Senate Bill 1149 also amended Code of Civil Procedure 1161.2 with the aim to protect against unfair damage to the credit of a residential tenant by generally prohibiting the court clerk from revealing unlawful detainer court records unless the bank or third party investor prevails at the unlawful detainer trial.

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Read our latest California Foreclosure Report: DOWNLOAD HERE

Highlights from this report:

• Notices of Trustee Sale fell 18.91% back down to expected levels after a 22% spike last month
• Cancellations drop 13.75%, a reversal of last months trend, but remain up 75.10% year over year
• Pre-Foreclosure inventory was down 20.18% from June, indicating that lenders may be noticing sales more quickly
• Discounting on the courthouse steps continues to climb since the beginning of the year, up approximately 5% since January to 21.6%
• Time-to-Foreclosure was down month over month by 3.42% to 226 days
• Time-to-Resell fell slightly for 3rd Party investors to 164 days, a 3.53% decline month over month.

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