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Repossessions fall 9% thanks to foreclosure freeze

chart_reo.top.gif By Les Christie, staff writer


NEW YORK (CNNMoney.com) -- Foreclosures fell in October, but it's not because fewer people are losing their homes. Instead, the market is seeing a temporary stay from banks freezing foreclose auctions to review loan documents.

Foreclosure filings of all kinds, including notices of default, notices of auctions and notices of auction sales, dropped 4.4% during the month, according to a report released by RealtyTrac on Thursday. But bank repossessions, the filing most affected by the freeze, shrank 8.7%.

Banks postponed auctions of homes with mortgages in default to make sure all all the documents were properly signed -- not robo-signed -- and that all the paperwork was in order.

"The numbers probably would have been higher except for the fallout from the recent 'robo-signing' controversy," said James Saccacio, RealtyTrac's CEO.

The drop in repossessions came after increases in four of the six previous months, topped by an all-time high in September, when 102,000 people lost their homes. In October, 93,246 homes were repossessed.

"A couple of years ago, these numbers would have been unimaginable," he said.

Sharga believes there could be a further drop-off in November, because the impact of the freeze was not fully reflected in the October report.

While that may result in further declines in bank repossessions, Sharga expects it to take many months before overall foreclosure rates really improve. There is still a very large backlog of borrowers who stopped paying their mortgages long ago but who have not yet been served with a single foreclosure filing and so are not being counted in RealtyTrac's statistics.

"Today, servicers are waiting longer and longer to put people in foreclosure," said Sharga. "It's not unusual for someone in default go six to nine months without receiving a notice of default."

He thinks this is an inventory management decision the banks make.

Why repossess another home in a neighborhood when the bank already owns a hundred just like it? Better to allow the old homeowners to remain and pick up the fallen leaves, mow the lawn and keep out the riff-raff than to evict them and pay someone else to maintain the home while it languishes on the market.

If that's the case, the foreclosure crisis will string out long after the economy regains its strength. That's one reason, that many industry experts are predicting very sluggish housing markets conditions for years to come. To top of page


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