Foreclosures off 30% this year

NEW YORK (CNNMoney) -- On the surface, the foreclosure crisis seems to be easing. The number of foreclosure notices filed during the first three months of 2011 fell 27% compared with the first quarter of 2010, according to a report from RealtyTrac released Thursday.

Only 681,000 properties got hit with some type of filing -- a notice of default, a scheduled auction or a foreclosure sale -- during the quarter, one for every 191 households.

There were 215,046 borrowers who lost their homes, down 17% year-over-year.

That improvement was in sharp contrast to other recent housing market metrics, with sales of existing and new homes very weak and home prices still sliding.

"The nation's housing market continued to languish in the first quarter, even as foreclosure activity fell to a three-year low," said James Saccacio, RealtyTrac's CEO.

The explanation for this contradiction is that the foreclosure improvement has been artificial, fueled by banks reacting to paperwork processing issues -- the infamous "robo-signing" scandal -- by cutting back on filings until they can clean up their procedures.

According to RealtyTrac spokesman Rick Sharga, without the cutback there would have been 900,000 filings during the quarter instead of 681,000. There would have been 280,000 to 300,000 bank repossessions instead of 215,000, he added.

Fewer homes were repossessed even though banks are modifying fewer loans to make them more affordable. Hope Now, a coalition of servicers, community groups and mortgage investors working to stem foreclosures reported last week that its members had modified 87,000 loans in February compared with 110,000 in December 2010.

Hope Now's director, Faith Schwartz, said fewer mods hardly means that the foreclosure crisis is clearing. "In the midst of all the disruptions, it's difficult to pinpoint a trend," she said.

The big positive that Schwartz cites is the significant month-over-month drops in both new foreclosures and in the number of borrowers who are 60 days or more late with payments. If fewer borrowers are entering the foreclosure process, fewer should eventually lose their homes.

On the other hand, said Schwartz, the severity of the delinquencies is increasing, with these borrowers falling 527 days past due, on average.

In New York and New Jersey, according to Sharga, it's more than 800 days now between when a typical delinquent borrower first receives a notice of default to when the home goes to a sheriff's sale.

"It's likely that most of those are not making any mortgage payments" during that period, he said.

The drop in foreclosures is widespread. RealtyTrac reported that filings dropped in each of the 20 hardest-hit metro areas. Year-over-year declines reached as high as 59% in Cape Coral, Fla., for the quarter. Even in Las Vegas, ground zero for the mortgage meltdown over the past few years, filings fell 8%.

Nevada, Arizona and California continued to rank as the states with the highest foreclosure rates. They came in 1-2-3 both for the quarter and for the month of March. The Fourth Horseman of the Foreclosure Apocalypse, Florida, has dropped down in the standings, to eighth place for the quarter and ninth for the month.

Las Vegas is once again the highest ranked metro area in per-capita foreclosures. One of every 31 homes absorbed a filing during the quarter, about six times the national norm. Modesto, Calif. (one in 46), Stockton, Calif. (one in 47), Vallejo. Calif., and Phoenix (both one in 48) filled out the top five.