‘Robo’ Foreclosures? Bank Repos Set New High in September

Foreclosure salesBank repossessions of U.S. homes surpassed the 100,000 mark in September for the first time, part of an overall increase of 3 percent in foreclosure activity compared to the previous month, according to a new report from RealtyTrac.
Foreclosure filings were reported on 347,420 U.S. properties – with a total of 102,134 bank repossessions, the foreclosure data firm said.
For the third quarter of 2010, foreclosure filings were reported on 930,437 properties, a nearly 4 percent increase from the previous quarter – but a 1 percent decrease from the third quarter of 2009.
Nonetheless, the record number of bank repossessions and overall month-to-month increase in filings — default notices, scheduled auctions and repossessions – comes as tens of thousands of foreclosure cases are being reviewed by top U.S. lenders.
And the ‘robo-signing” of affidavits in these cases are under investigation by a rare unified front of attorneys general from all 50 states.
Most analysts expect bank repossessions to take a significant dip in the fourth quarter, as foreclosure documentation is reviewed since being called into question in recent weeks. Reports of “robo-signing” paperwork by lender representatives — without reviewing case facts or claims — may lead to fines against the largest U.S. lenders.
“If you’re facing foreclosure the freeze is good news — at least until the inevitable thaw,” says James J. Saccacio, chief executive officer of RealtyTrac. “But a freeze is a temporary event that also brings uncertainty into the marketplace. If you’re waiting for a return to marketplace normalcy — whatever ‘normalcy’ might be — then another kink in the foreclosure process is hardly going to be helpful.”
While shoddy paperwork could re-open some cases – and possibly lead to reversals in favor of borrowers – stagnated foreclosure sales could also have a chilling effect on the housing market. Home sales activity has stalled since the spring expiration of homebuyer tax credits.
Foreclosure activity in the 23 judicial states most affected by the documentation reviews accounted for 40 percent of all foreclosure activity in the third quarter — and 36 percent of bank repossessions, or REOs.
Bank of America, the largest lender by assets, is the only bank to issue a complete freeze in foreclosure proceedings in all states pending paperwork reviews.
JPMorgan Chase has extended its review to more than 115,000 foreclosure cases in more than 40 states.
Another major mortgage lender, Wells Fargo, said it does not plan to initiate a moratorium.
“Our affidavit procedures and daily auditing demonstrate that our foreclosure affidavits are accurate,” Wells Fargo said in a statement.
Despite calls from consumer activists and civil rights leaders for a nationwide moratorium on foreclosures, U.S. officials have refused to issue such an order, fearing a deeper downturn in the sluggish housing market that could hurt an already weak economic recovery.
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