Foreclosure Rate Drops in October Following Robo-Signing Controversy

Nov. 11, 2010— -- After foreclosures hit a record high in September, the number of properties seized dipped below six figures for the month of October, and the number of properties that received foreclosure notices also declined slightly.

Lenders took back 93,236 housing units in October, a nine percent drop from the previous month's level.

In addition, though the number of properties that received a notice of default, auction or repossession topped 300,000 for the 20th consecutive month, hitting 332,172 October, the online foreclosure tracking firm RealtyTrac reported that filings decreased by 4 percent from the previous month.

"The numbers probably would have been higher except for the fallout from the recent 'robo-signing' controversy -- which is the most likely reason for the 9 percent monthly drop in REOs [real estate owned by banks after foreclosure] we saw from September to October, and which may result in further decreases in November," said RealtyTrac CEO James J. Saccacio.

Because of that controversy, don't expect the decline across some states to be permanent. After banks finish examining questionable paperwork and documents, the number of foreclosure filings likely will rise again.

"The press by the lenders to foreclose is going to find them alleging that the paperwork is fine," said Richard Kahn, author of "Winning Against Foreclosure," "and it's going to come down in foreclosure to the judge and the borrower and the attorney.

"It's the judges in foreclosure who are judges and jury," Kahn said. "Courts have to take documentation that is submitted to them as true unless proven otherwise. That's why it's important in every case to have a borrower and their attorney come to that particular judge with evidence that shows that, indeed, the documentation is false in that case."

Last month, attorney generals in all 50 states began an investigation into reports that sloppiness or deceit were contributing factors in the real estate crisis. The decision came after reports of robo-signing or foreclosures by rubber stamp began to surface in the office of some of the nation's largest mortgage lenders.

In 2006, the housing market began to collapse after unemployment began to skyrocket and the stock market began to implode. The price of homes in some of the largest states began to shrink. Homeowners who were unable to afford their property walked away or lost their property, leaving lenders with an abundance of property valued below the amount owed.

Foreclosure Hotspots and Other Facts

In October, one in every 389 housing units received a foreclosure filing.

As in previous months, Nevada initiated more foreclosure filings than other state in the nation. In the gambling epicenter of the United States, one in every 79 homes received a foreclosure filing.

Florida had the second-worst percentage. In the Sunshine State, one in every 155 housing units received a filing.

For the third month in a row, Arizona completed the top three. There, foreclosures affected one in every 165 homes.

West Virginia, North Dakota and Vermont remained bright spots in the overall gloomy American housing market. The three states ranked 48th, 49th and 50th, respectively, for foreclosure filing rates in all 50 states. In Vermont, one in every 14,210 housing units received foreclosure filings.

The state of California continued to claim a huge chunk of foreclosure filings, accounting for 20 percent of the nation's total. But despite the percentage, the state saw a decline in foreclosure filings of 12 percent from September.

Even so, California, Florida, Michigan, Illinois and Arizona accounted for 50 percent of the nation's total foreclosure filings.