According to the latest data from Realty Trac, foreclosures in 2011 hit their lowest point in four years. One in every 69 homes received at least one foreclosure filing in 2011, while 804,000 homes were repossessed, down from 2010′s record of more than one million repossessions.
While this is good news for the economy, as continued foreclosures have been a drag on the recovery, the numbers are not quite as rosy as they appear. Due to the foreclosure fraud scandal that erupted in 2011 — in which the nation’s largest banks were caught cutting corners on the foreclosure process and submitting fraudulent documents to courts — a host of foreclosures were slowed as the banks examined their foreclosure processes. But now that the banks’ foreclosure pipelines are up and running again, 2012 could be a dark year on the housing front:
While the declines seem like good news for the housing market, where a flood of foreclosed homes has depressed home prices, much of it is due to processing delays caused by fall-out from the “robo-signing” scandal that broke in late 2010.
During the year, banks spent more time making sure paperwork was legal and proper, creating a backlog in the foreclosure pipeline. As a result, the average time it took to process a foreclosure climbed to 348 days during the fourth quarter, up from 305 days a year earlier.
“Foreclosures were in full delay mode in 2011, resulting in a dramatic drop in foreclosure activity for the year,” said Brandon Moore, chief executive officer of RealtyTrac.
However, Moore said there were “strong signs” during the second half of the year that lenders are working through foreclosure backlogs in certain markets. He expects foreclosure activity to rise above 2011′s level but remain below the peak hit in 2010.
An early sign of a possible foreclosure wave is that foreclosure filings jumped 21 percent in the third quarter of 2011. As we’ve noted, “some economists fear the continued slump in housing could short-circuit the recovery in jobs by making it harder for Americans to relocate to find work.”
Last week, the Federal Reserve released a series of proposals for jumpstarting the recovery in housing, including streamlining the mortgage modification process and even forgiving some loan principal for borrowers who have made a good faith effort to stay current on their underwater mortgages. Those proposals have been met with derision by Senate Republicans, with Sen. Bob Corker (R-TN) calling them “completely egregious.”