February saw a 14% drop in foreclosures across the country from the month before, and a 27% decrease from the same month last year, according to RealtyTrac, which reported 225,101 properties receiving a foreclosure filing in February.
RealtyTrac’s chief, James Saccacio, thinks that the drop doesn’t reflect fewer distressed properties so much as it represents a mounting backlog of filings, waiting to be processed properly. As revealed last fall, the accelerated pace of banks’ foreclosure filings since 2008 was supported by the use of suspect practices, including “robo-signers,” to expedite processing. Based on these discoveries, all 50 State Attorney Generals, supported by several key branches of the federal government, have been working on a slate of changes to overhaul the process and provide more protections to borrowers, as well as systemically impact how servicers, investors and borrowers interact.
In early March, the officials issued a 27-page term sheet of revised foreclosure processing demands, setting “out how [the banks] should service loans and handle foreclosures,” said Geoff Greenwood, communications director for the Iowa Attorney General spearheading the states’ efforts. “Assuming the parties come to some agreement, these would be binding legal requirements.” American Banker published a brief article outlining the key points of the term sheet.
The Washington Post reports that in addition, officials are proposing penalties, which could exceed $20 billion, against the banks possibly to be used to rework existing mortgages, along with a commitment to help avert 1.5 million new foreclosures, in an effort to provide concrete relief to the housing market. As evidenced by this month’s slowed rate of foreclosures, the banks—under pressure to give borrowers (and investors) more rights and greater recourse, as well as to meet more stringent standards, before initiating repossession—are even now processing foreclosures more carefully.