September Bank Foreclosures Reach New Record

Americans are losing their homes at record pace.

October 12, 2010, 6:40 PM

Oct. 14, 2010— -- The nation's foreclosure epidemic gathered steam in September, with banks taking over more than 100,000 properties for the first time. Overall, filings rose 3 percent, according to RealtyTrac, an online service that tracks foreclosure rates.

More than 930,437 properties were hit with a foreclosure filing in the July-September quarter of the year -- that includes a default notice, repossession or scheduled notice. of 288,345 properties were lost to foreclosure in the period, the most since the bust began.

Foreclosures are expected to fall following the decision by several of the largest lenders to halt filings because paperwork for many loans has been found to be missing or incorrect.

"We expect to see a dip in those bank repossessions — and possibly earlier stages of the foreclosure process — in the fourth quarter as several major lenders have halted foreclosure sales in some states while they review irregularities in foreclosure-processing documentation that has been called into question in recent weeks," said RealtyTrac CEO James J. Saccacio.

The foreclosure crisis in the U.S. began in 2006, when the stock market collapsed and unemployment began climbing to the highest levels since the Great Depression of the 1930s. Home prices collapsed in many states including California, Florida, Nevada and Arizona. Homeowners either couldn't pay or walked away from their mortgages, leaving the lenders with properties worth far less than the amount owed.

Now foreclosures have become a huge part of overall sales. For the month of September, foreclosed property made up 31 percent of home sales. The 24 states with the most foreclosure documentation problems account for 32 percent of all foreclosure property sales, according to RealtyTrac.

In the third quarter, one in every 139 housing units received a foreclosure filing. Nevada continued to reign as the state with the highest foreclosure rate with one in every 29 homes in some stage of going back to the lender. Next is Arizona, where one in every 55 homes have received a foreclosure filing. In No. 3 Florida, foreclosures affect one in every 56 homes.

For the first time ever bank repossession reached six figures with more than 102,134 homeowners losing their property in the month of September. The record numbers come after the Obama administration's Home Affordable Modification program sank to a 10-month low in August.

The program meant to save homes only assisted 33,000 homeowners. In 2009 President Obama vowed to help up to 4 million homeowners through the program, but only a little more than 10 percent or 449,000 homeowners have received assistance.

In the third quarter a few states like Vermont and North Dakota escaped the bleak housing news. The two ranked 48 and 49, respectively, for foreclosure filings. Homeowners in West Virginia were the safest of all 50 states with only one in every 2,383 receiving foreclosure filings.

Yesterday, the attorneys general of all 50 states announced an investigation into whether sloppiness or deceit led to the latest episode of the national foreclosure drama, further threatening the recovery of the U.S. housing market.

"This is not a silver bullet to keep millions of Americans in their homes," said Iowa Attorney General Tom Miller, who's heading the bipartisan investigation. "This is a chance to right the law and get the process right, a chance to have some extra time ... and maybe a chance to do some modifications."

Statements from Miller and other state investigators said the initial focus will be on whether industry employees -- so-called "robo-signers" -- signed off on thousands of foreclosures every month without reviewing the files as legally required.

"Robo-signing is the one [problem] ... we're most concerned about," Miller told reporters late Wednesday, but he added, "We're not ruling out other issues."

The immediate goals of the investigation appear to be a halt of improper foreclosures and a review the past and present mortgage service practices, investigators said.

"We want this to never happen again," Miller said. "We will try to do this as quickly as possible."

In courts throughout the nation, homeowner attorneys have alleged that lenders forged signatures and improperly notarized documents in the rush to foreclose on homeowners.

The joint investigation into the practices of the booming mortgage-servicing industry could pressure financial institutions to rewrite a sea of corrupt paperwork.

Previous calls for a nationwide foreclosure moratorium had industry insiders worried but the states stopped short of requesting such a measure.

"The worst thing anybody could do right now is impose a lengthy moratorium on foreclosures, particularly if it results in people not being able to sell properties that have already been foreclosed on," said Rick Sharga, vice president of the real estate data firm RealtyTrac. "Right now, foreclosure properties represent about 30 percent of all home sales, and to take 30 percent of sales out of the housing market at a time when it's already unstable could have pretty disastrous results."

The Obama administration Monday rejected calls for a nationwide moratorium on foreclosures amid growing concerns about the market's recovery.

A moratorium would help families on the verge of losing their homes, but Sharga and other industry experts said it would lead to a backlog of homes on the market and further depress prices.

Even with tight lending standards, the nation is on pace to sell 4 million properties by the end of the year. That's way down from the peak of the housing boom when over 6 million were sold annually, however.

"The housing market is trying to recover ... but right now these technical delays are causing additional uncertainly," said Lawrence Yun, chief economist for the National Association of Realtors. "Some potential buyers may not want to enter the market now. And that will hold back the recovery time."

In recent weeks, major lenders such as JPMorgan Chase, Ally Financial's GMAC Mortgage unit and Bank of America have conceded that paperwork supporting an unknown number of foreclosures contain errors ranging from wrong dates to forged or inconsistent signatures. In some instances, mortgage company employees signed foreclosure documents without first verifying the information in them.

In response, the banks have suspended tens of thousands of pending foreclosures. Bank of America, for example, has suspended all its foreclosures in 23 states.

With reporting by ABC News' Ray Sanchez.

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