Banks Play Catch Up On Foreclosures
From the archive, 2012. This is contemporaneous reporting, preserved as it ran. Figures, rates and forecasts in it were current then and are not now.
By Mike Colpitts
Banks are playing catch up formally repossessing homes in judicial foreclosure states as they unwind a back-log of foreclosures from the 
robo-signing scandal. The foreclosure inventory remains at near all-time highs with 4.12% of all U.S. homes with mortgages in the foreclosure pipeline, according to Lender Processing Services.
However, new problem loan rates showed an improvement for the eighth consecutive month, reaching only 1%, a low that hasn’t been seen since July 2007, substantially off its January 2009 peak of 2.92%.
The nation’s five largest banks agreed to a $25 billion settlement with all but one state attorneys office in a landmark case in which lenders foreclosed on as many as 4.5 million homeowners without proof of legal ownership in the robo-signing scandal in judicial foreclosure states, where foreclosures require court approval.
“There’s a stark contrast in foreclosure inventories between judicial and non-judicial states,” said LPS analytics vice president Herb Blecher. Judicial foreclosures represent 6.5% of all mortgages under foreclosure, while only 2.5% of mortgages in non-judicial states are in the foreclosure pipeline.
“Both these figures are significantly higher than the pre-crisis average of 0.5%, but it is worth noting that the average year-over-year decline in non-current loans for judicial states is less than one percent, whereas in non-judicial states, it’s down 7.1 percent,” said Blecher.
About 53% of loans in foreclosure in states where judicial foreclosures are required have been delinquent more than two years, compared to slightly more than 30% of loans in non-judicial states. The May data also shows that after a sharp seasonal decline, delinquencies stabilized in May to compose 7.2% of U.S. home mortgages.
Across the nation, foreclosure sales, which mark the end of the foreclosure process increased more in non-judicial states. In those states, 6.46% of the existing foreclosure inventory progressed to formal foreclosures in May compared to just 2.14% of the inventory in judicial states.