Mortgage default notices increase in August
Nearly a year after the massive robo-signing scandal and the resulting foreclosure slowdown, it appears that banks are pressing forward with their foreclosure processes at an increasingly fast rate. According to foreclosure listing firm RealtyTrac Inc., the number of homes that received an initial default notice rose significantly last month, reaching a nine-month high.
Specifically, RealtyTrac reports, initial default notices increased by 33 percent from July to August, marking the largest monthly jump in four years. Currently, there are approximately 3.7 million more homes in some stage of the foreclosure process than there would be in a healthy housing market. Experts believe this re-energization of foreclosures could help to decrease this massive backlog and, in doing so, bring the housing market closer to recovery.
Last fall, foreclosures came to a screeching halt in Georgia and many parts of the country after it was revealed that mortgage lender employees had been engaging in fraudulent practices. Known as robo-signing, these practices included signing foreclosure documents without reading them or verifying their accuracy and forging the signatures of superiors or of people that did not even exist. Following this revelation, banks and state government officials began investigations of the foreclosure practices in several states, causing foreclosures to slow.
While this may have been a good thing for individual homeowners, it likely stalled the recovery of the damaged housing market. Foreclosures bring home values down, making it difficult for cash-strapped homeowners to sell their homes. In addition, a large supply of foreclosed homes creates hesitance and uncertainty in potential homebuyers.
Source: Atlanta Journal-Constitution, “Mortgage default warnings surged in August,” Alex Veiga, Sept. 15, 2011