The number of homes that received a first-time default notice during the July to September quarter increased 14% compared to the second quarter, according to a report released Thursday by RealtyTrac Inc.
That rise indicates banks are moving aggressively against borrowers who have fallen behind on their mortgage payments than they have since industrywide foreclosure processing problems emerged last fall. Those problems resulted in a sharp drop in foreclosure activity this year.
The surge in notices means homeowners who haven't kept up their mortgage payments could now end up on the foreclosure path sooner. The third-quarter increase in initial defaults was largely a result of a spike in August. In September, default notices were off 10% from August, RealtyTrac said.
Still, the jump in initial defaults in the quarter is significant because it is the first increase after five consecutive quarterly declines, suggesting banks are gradually addressing a backlog of homes in foreclosure and are acting on more recent home loan defaults, said RealtyTrac CEO James Saccacio.
"While foreclosure activity in September and the third quarter continued to register well below levels from a year ago, there is evidence that this temporary downward trend is about to change direction, with foreclosure activity slowly beginning to ramp back up," Saccacio said.
A total of 195,878 properties received a default notice in the third quarter. Despite the sharp increase from the second quarter, the total was still down 27% versus the third quarter last year, RealtyTrac said.
Lenders took back 196,530 homes during the quarter, down 4% from the second quarter and down 32% from the same quarter last year.
Banks remain on track to repossess some 800,000 homes this year, down from more than 1 million last year, Saccacio said. RealtyTrac had originally anticipated some 1.2 million homes would be repossessed by lenders this year.
The increase in foreclosure activity could mean a potentially faster turnaround for the housing market. Experts say a revival isn't expected as long as there is a glut of potential foreclosures hovering over the market.
Foreclosure activity began to slow last fall after problems surfaced with the way many lenders were handling foreclosure paperwork.
Many of the nation's largest banks reacted by temporarily ceasing all foreclosures, re-filing previously filed foreclosure cases and revisiting pending cases to prevent errors.
In the third quarter, it took an average of 336 days, or 11.2 months, for a home to go from receiving an initial notice of default to being foreclosed by a lender, RealtyTrac said.
That's up from 318 days, or 10.6 months, in the second quarter and represents the largest average span of time for the foreclosure process since the first quarter of 2007, the firm said.
States
It took an average of 986 days, almost three years, for the foreclosure process to play out in New York in the third quarter -- the longest stretch of time of any state, RealtyTrac said.
New Jersey was a close second at 974 days, while Florida was third at 749 days, or just over two years.
Not all states are seeing an increase in the time it takes for homes to move through the foreclosure process, however.
In Texas, homes made it through the foreclosure process in an average of 86 days during the third quarter, down from 92 days in the second quarter, RealtyTrac said.
