Home foreclosures jump in third quarter

Wed Dec 21, 2011 12:00pm EST

(Reuters) - The number of new home foreclosures jumped by more than 21 percent in the third quarter from the second as banks moved more aggressively after a pause to review how they deal with troubled borrowers, according to a report released by a bank regulator on Wednesday.

In the final months of 2010 some big lenders, including Bank of America Corp and Wells Fargo, suspended foreclosure proceedings as they responded to criticism over shoddy paperwork used to support foreclosures.

With those reviews completed, the pace of foreclosures is picking up.

The report, by the Office of the Comptroller of the Currency (OCC), said that the large increase in new foreclosures also occurred because banks have "exhausted alternatives to foreclosure for the large inventory of seriously delinquent mortgages working through" the system.

With both the economy and the housing market showing some signs of improvement, the number of new foreclosures in the third quarter was 11.8 percent less than a year ago.

An OCC official said the third quarter percentage increase brought the total number of new foreclosures back to the historically high level that is expected given the amount of seriously delinquent loans in the system.

The number of new foreclosures in the third quarter was 347,726, about the same as before some large banks hit the pause button on foreclosures beginning late last year.

Bruce Krueger, a mortgage official at the OCC, said he expects the amount of new foreclosures to remain at or near the third quarter level for at least the next few quarters.

"I think what you are seeing is what would be considered a more expected level, a more normalized level and I would expect that to continue going forward so long as we have this pipeline of serious delinquent mortgages out there," Krueger told reporters on a conference call.

The OCC defines a seriously delinquent mortgage as a loan that is more than 60 days past due or a loan to a bankrupt borrower that is more than 30 days past due.

In the third quarter there were close to 1.6 million loans that fell into this category, which was about 1 percent less than the previous quarter and 16 percent less than a year ago.

Other data released this week shows the depressed housing sector starting to show signs of strength heading into 2012, with the strongest evidence coming from new housing starts for November.

An unexpected 9.3 percent gain to a 685,000 annual rate was the highest level of new-home construction in 19 months. Building permits issued for new houses and apartments climbed 5.7 percent to a more than one-year high.

Sales of previously owned U.S. homes increased 4 percent in November, to an annual rate of 4.42 million units, although downward revisions of data for the last four years showed the housing market recession was deeper than previously thought, according to data released on Wednesday by the National Association of Realtors.

Wednesday's OCC report showed that the number of borrowers making mortgage payments on time in the third quarter remained almost unchanged from the previous quarter.

The OCC said that of the 32.4 million loans covered by the report, 88 percent were considered current and performing.

The OCC Mortgage Metrics Report provides performance data on first-lien residential mortgages serviced by national banks and federally regulated thrifts. The mortgages in this portfolio make up 62 percent of all mortgages outstanding in the United States.

The slowdown in foreclosures earlier this year coincided with banks coming under greater scrutiny both from state attorneys general and federal regulators.

In April, several large banks entered into a settlement with the OCC, the Federal Reserve and the now defunct Office of Thrift Supervision on steps to improve their foreclosure processes, such as providing borrowers with a single point of contact for questions.

States and the Justice Department are currently trying to negotiate a settlement with Bank of America, JPMorgan Chase & Co, Citigroup Inc, Wells Fargo and Ally Financial.

(Reporting By Dave Clarke and Margaret Chadbourn; Editing by Steve Orlofsky and Tim Dobbyn)

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Comments (2)
breezinthru wrote:
The states are in the process of selling a citizen’s constitutional right to due process to the very corporations who harmed that citizen by creating and profiting from the greatest fraud in world history.

When the corporate fraudsters finally pay off cash-strapped state governments, how much of that compensation will filter down to citizens like me who have lost about 80K USD in the value of my current residence? Of course, not a nickel of that money will be used to make me whole. Neither will any of that money will be awarded to me in exchange for my personal right to due process that my state attorney general sold to Wall Street on my behalf.

My state government will certainly find ways to spend that settlement money that benefits someone, it just won’t be me. I don’t have any friends down at the state capitol.

If there had been a question on my college entrance exam about whether states could sell a citizen’s constitutional right to corporations, I would have got that one wrong.

Dec 22, 2011 10:52am EST  --  Report as abuse
1stMartain wrote:
The large “inventory” of bank own houses and houses that about to be foreclosed on will keep the inflation adjusted value of houses suppressed for the next decade. Real wages in America haven’t changed since the turn of the century and everything I’ve read says that the trend will continue until the U.S. workforce acquires the job skills and education that it needs to fill higher level employment opportunities.

If you own a house then don’t expect to recover your losses unless you live in one of the select markets that will benefit from the next economic expansion. (Those markets usually have ocean views.)

Dec 22, 2011 12:42pm EST  --  Report as abuse
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