Foreclosure filings dropped in 2011 to their lowest level since 2007, according to a new report released today from RealtyTrac. Unfortunately, the lower number of foreclosures doesn't mean fewer people are going to lose their homes.
Just the opposite. According to RealtyTrac's Year-End 2011 U.S. Foreclosure Market Report, the number of foreclosures declined because lenders stopped processing foreclosures and created a huge backlog in the foreclosure pipeline.
According to RealtyTrac's report, some 2,698,967 foreclosure filings -- which include default notices, scheduled auctions and bank repossessions -- were reported on 1,887,777 U.S. properties in 2011, a decrease of 34 percent from 2010. About 1.45 percent of all U.S. housing units (about 1 in 69) received a foreclosure filing last year.
That's the good news, but the time it took to process those foreclosures increased 24 percent over the same time period. This increase in foreclosure processing time has largely been caused by the robosigning controversy, which triggered lenders to perform a massive review of foreclosure procedures.
This review of the foreclosure process caused lenders to hold off on beginning many new filings, which is a big contributor to the lower number of foreclosures in 2012. According to Brandon Moore, CEO of RealtyTrac, "Foreclosures were in full delay mode in 2011, resulting in a dramatic drop in foreclosure activity for the year."
The time it takes to process a foreclosure will probably remain high through 2012, and it is likely foreclosure filings will increase in the coming year. "The lack of clarity regarding many of the documentation and legal issues plaguing the foreclosure industry means that we are continuing to see a highly dysfunctional foreclosure process that is inefficiently dealing with delinquent mortgages -- particularly in states with a judicial foreclosure process," Moore says.
The states with the top foreclosure rates are those that were most affected by the housing bubble-burst back in 2008. Nevada, Arizona and California all posted drops in filings but retain the three highest foreclosure rates. Rounding out the top 10 states with the highest foreclosure rates in 2011 were Georgia, Utah, Michigan, Florida, Illinois, Colorado and Idaho.
Despite the inefficiency in the foreclosure process nationwide, lenders are beginning to push through their bottleneck of foreclosures in select markets, and Moore believes this trend will take hold in other parts of the country. Foreclosure activity is expected to increase through 2012, but remain "below the peak of 2010" according to Moore.
For a full review of the study and a map of foreclosure activity nationwide, see RealtyTrac's full Year-End 2011 U.S. Foreclosure Market Report.