(Removes incorrect reference in lead to month-on-month fall)
By Anna Louie Sussman
NEW YORK, June 14 U.S. foreclosure starts rose
year-over-year in May for the first time in more than two years
as banks resumed dealing with distressed properties after a
mortgage abuse settlement earlier this year, data firm
RealtyTrac said on Thursday.
The $25 billion settlement between major banks and states,
formally approved in April, had been expected to jump-start
foreclosure proceedings that were previously stalled by
uncertainty about the liability of banks.
Overall foreclosure activity, which includes default
notices, scheduled auctions and bank repossessions, affected
205,990 properties in May, a 9.1 percent increase from April.
The figure was 4.2 percent lower, however, than in May 2011,
RealtyTrac said in a monthly report.
Foreclosure starts grew 12 percent from April and 16 percent
on an annual basis after 27 straight months of year-over-year
declines. Foreclosure starts were filed on 109,051 homes in May,
the first month-to-month rise since March.
Bank repossessions increased 7 percent after sinking to a
49-month low in April, with 54,844 homes repossessed in May.
"That the May numbers were up the month after that
settlement was completed is an indication that lenders are more
confident that there are clear ground rules to foreclose now, so
they can play by the rules," said Daren Blomquist, RealtyTrac's
"The banks are getting to a place where they consider their
foreclosure processing issues resolved, so they're confident
enough to go ahead and push through more foreclosures,"
Blomquist noted the jump in foreclosure starts was not a
sign that a new crop of borrowers was beginning to miss
payments, citing figures from the Mortgage Bankers Association
indicating new delinquencies fell in the first quarter of 2012.
Georgia's foreclosure activity increased by 32.9 percent
from April and 30 percent from May 2011, making it the month's
leader in foreclosure activity, ahead of Arizona, Nevada and
California, the report said.
Nevada's foreclosure activity was down 66 percent from a
year ago but it still has the third-highest rate of any state in
The Riverside-San Bernardino metro area in southern
California had 8,388 properties with foreclosure filings in May,
a 19 percent increase from April. One out of every 179 housing
units is in foreclosure, over 3.5 times the national average.
New Jersey continued April's trend, with 1,136 foreclosure
starts in May, an annual rise of 118 percent. In April,
foreclosure starts rose 180 percent annually.
Blomquist expected many of the new foreclosure starts to end
in short sales, in which a property is sold and the lender keeps
the proceeds in exchange for releasing the borrower from further
Short sales were up 25 percent in the first quarter of 2012,
reaching a three-year high, since lenders can often fetch a
higher price in a short sale than if they repossess them and
then put them back on the market.
By moving houses out of the so-called "shadow inventory" and
onto the market, the increase in foreclosures could be a drag on
the fragile U.S. housing recovery. The
S&P/Case-Shiller index of home prices in 20 metropolitan areas
inched up February and March, in monthly terms.
The median nationwide asking home price in May rose 3.2
percent from last May to $194,900, and the number of homes for
sale dropped 20 percent to 1.88 million, data from Realtor.com,
the website of the National Association Realtors Association,
(Reporting by Anna Louie Sussman; editing by M.D. Golan)