The number of new foreclosures in 2011 dropped nearly 40 percent, according to year-end numbers just released by Lender Processing Services; there is, however, little cause for celebration. The fall is largely due to moratoria and process reviews stemming from the so-called “robo-signing” foreclosure paperwork scandal. Mortgage delinquency rates were largely unchanged from last year, which means all that distress will be pushed forward to 2012 and beyond.
To give you an idea of just how much the “robo” scandal is toying with the numbers, LPS compared states that require foreclosures to go through the courts versus states that don’t (judicial versus non-judicial) and found the following:
– 50 percent of loans in foreclosure in judicial states have not made a payment in two years, as opposed to 28 percent in non-judicial states.
– Foreclosure sale rates in non-judicial states are about four times those in judicial states. (judicial means they must go thru the court process to foreclose)
“Nationally, foreclosure pipelines remain at historic highs, but they are clearing at very different rates depending upon state procedures,” says Herb Blecher of LPS Applied Analytics. With the nation essentially split between judicial and non-judicial foreclosure states, it’s safe to say the foreclosure crisis will linger longer than anyone expected, especially with negotiations for a settlement between big banks and state attorneys general hitting yet another roadblock.
Additionally: Foreclosure homes sold for 34 percent less than the average price of a non-distressed home during the third quarter of 2011, according to new data released byRealtyTrac Thursday. The average sales price of homes in the process of foreclosure or bank-owned was $165,322 over the July-to-September period last year. RealtyTrac says third parties purchased a total of 221,536 residential properties classified as foreclosures or REO during the third quarter of 2011, representing just 20 percent of all residential sales during that timeframe. The third-quarter share of distressed sales activity is down from 22 percent in the second quarter and down from 30 percent of all sales in the third quarter of 2010. At that time, a year earlier, the discount on a home in foreclosure or REO was averaging 37 percent.
“While foreclosures continue to represent an excellent bargain-buying opportunity for many buyers and investors, foreclosure sales accounted for a smaller share of the total market in the third quarter,” commented Brandon Moore, RealtyTrac’s CEO. Mr. Moore says he’s not too surprised by the numbers, given the ambiguity surrounding foreclosure procedures and how they differ by state.
Good News: There are still bargains out there if you do your homework and have cash to buy quickly.
Bad News: It appears, at least for now that 2012 will unfold in a similar fashion as 2011.