Unemployment Triggers Foreclosure Rise

Bankers foreclosed on 95,364 residential properties in August, the highest monthly total since Realty Trac has been following foreclosures, and about 2% higher than the previous peak of 93,777 bank repossessions in May 2010 as growing unemployment triggered the increase. August formal foreclosures were up 25% from year ago levels, the ninth straight month where REOs have increased on a year-over-year basis.

Total foreclosure notices filed also rose four percent in August, against 338,836 residential properties for the month. One out of every 381 housing units was served a foreclosure filing.

Home Foreclosure

Some 96,469 properties received a default notice in August, the first step in the foreclosure process representing a one percent decline from the prior month and a 30% reduction in initial formal late mortgage notices from a year ago. It was the seventh consecutive month that default notices have decreased on a year over year basis. Default notices peaked in April of 2009 with 142,064 nationwide.

However, high unemployment and a weak economy are triggering an increase in default notices in some areas, which have been particularly hard hit by the foreclosure crisis. Default notices rose for the third straight month in California, while Florida, Ohio, New York and Indiana also saw month over month rises. Foreclosure auctions, the last stage in the painful foreclosure process were scheduled for the first time on a total of 147,003 properties in August, a 9% increase from the previous month.

“The trend lines of decreasing default notices and increasing bank repossessions converged in August with virtually the same number of new default notices and bank repossessions for the month, a clear indication that the clogged foreclosure pipeline is being carefully managed on both ends by lenders and servicers,” said RealtyTrac CEO James Saccacio.

Five states account for more than half of all foreclosures nationally. California accounted for 20% of the total in August alone with 69,143 properties receiving a foreclosure filing during the month. Florida accounted for nearly 17 percent.

High joblessness in Michigan, Illinois and Arizona are each accounting for about 5% of foreclosures throughout the country.

“The numbers don’t lie. They very clearly demonstrate that any recovery in state and national economic performance isn’t trickling down to workers, the very people responsible for making these mortgage payments,” said Serdar Bankaci, CEO of Default Research, Inc. “Until unemployment is curbed and workers see a real, sustained recovery in employment and wages, I expect pre-foreclosure filings to continue rising.”

Nevada documented the nation’s highest state foreclosure rate for the 44th straight month with one in every 84 housing units receiving a foreclosure filing. Florida activity declined on a year-over-year basis for the fifth straight month, but Florida’s foreclosure rate still ranked second highest among all states. Arizona had the third highest percentage of foreclosures.

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