Foreclosure Starts Down Sharply – for Now – Due to New Mortgage Settlement Rules

Foreclosure starts were down 21.9 percent in October and almost 48 percent on a year-over-year basis, resulting in a nearly 7 percent drop in overall foreclosure inventory.
But the October report from LPS Applied Analytics stresses that the sharp decline represents a temporary lull as the biggest lenders adopt new procedures mandated by the $25 billion national mortgage settlement.
Senior Vice President Herb Blecher explained, this fall-off in foreclosure starts is likely a temporary phenomenon, driven by new borrower notification requirements called for in the National Mortgage Settlement.
The new rules require mortgage servicers to provide written notice to borrowers 14 days prior to referring a delinquent loan to a foreclosure attorney.
“This has resulted in what is likely a temporary slowdown in foreclosure starts that we do not believe is indicative of a longer-term trend,” said LPS Senior Vice President Herb Blecher.
Meanwhile, LPS provided the latest measures indicating steady growth in home prices.
U.S. home prices were up 3.6 percent year-over-year in September and on track to gain between 5 to 7 percent for 2012 – while overall sales volumes remain relatively low.
During the past 12 months, there have been approximately 4.1 million residential real estate sales, less than half the annualized rate at the market’s peak in November 2005.
Moreover, 1.3 million of those transactions have been distressed sales, compared to just 226,000 at the peak. Despite 2012’s appreciation rate, home prices are still nearly 23 percent off their June 2006 peak.

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