Banks boost Nevada foreclosure starts, but numbers still down

Banks significantly stepped up foreclosure starts in Nevada and other Western states in January, but the numbers are down from a year ago, Discovery Bay, Calif.-based ForeclosureRadar.com reported Thursday.

In Clark County, there were 1,115 notices of default filed in January, up 13.5 percent from the prior month but a dramatic 80 percent decrease from 5,695 in January 2011, the online listing service showed. The notice starts the foreclosure process.

Notices of trustee sales dropped to 2,815 during the month, down 20.2 percent from December and down 40.8 percent from the same month a year ago.

A total of 1,345 Clark County homes went back to bank in January, a 44.6 percent increase from the previous month and 40.4 percent decrease from the same month a year ago.

Overall, Nevada saw 1,295 notices of default filed in January, a 16.6 percent increase from the previous month, ForeclosureRadar said. Foreclosure sales rose 59.8 percent to 2,521, and the time period to foreclose shrunk 8.8 percent to 301 days.

Nevada still posted the nation’s highest foreclosure rate for the 61st month in a row, RealtyTrac reported. Foreclosure activity in Nevada fell
8 percent last month from December but was down 52 percent from January last year, the Irvine, Calif.-based firm said.

High unemployment, a sluggish housing market and falling home values remain major factors in homeowners falling behind on their mortgage payments. Many borrowers also have stopped paying their mortgage because they owe more on the mortgage than the home is worth.

Reports about more foreclosures run counter to the decline in first-time unemployment benefit claims, which fell to 348,000, their lowest level since March 2008.

Most economists associate high foreclosure rates with high unemployment, but that is not the case in Nevada, said Sean O’Toole, chief executive officer of ForeclosureRadar.com.

“Clearly, unemployment is not helping the foreclosure crisis, but the foreclosure crisis — especially in Nevada — is about prices that were unsustainable and correcting and 70 percent negative equity,” O’Toole said Thursday. “A lot of people talk about unemployment as what’s driving foreclosures, but I think that’s mostly driven by banks that don’t want to admit stupid lending practices are the primary driver of foreclosures. We’ll be clearing that mess up whether unemployment is high or low.”

January’s numbers should put to rest any notion that a wave of foreclosures is coming in 2012, at least in the Western states covered by ForeclosureRadar, O’Toole said.

Foreclosure starts remain significantly lower than a year ago, when many banks still had self-imposed moratoriums in place from the robo-signing scandal, he said.

The decline in new foreclosures as a result of a Nevada law that took effect in October is quickly depleting the inventory, he added. Nevada properties scheduled for sale have dropped
57.6 percent from 16,570 a year ago to 7,020 in January.

With a foreclosure timeframe of more than eight months, there is little chance of a wave this year, even if all the banks started the foreclosure process en masse, O’Toole said.

But RealtyTrac vice president Daren Blomquist disagrees. The recent
$25 billion settlement between the banks and state attorneys general helps clarify the rules banks must follow to foreclose on borrowers. That will pave the way for more foreclosures, he said.

“The settlement will accelerate the foreclosures that are happening this year, and it will accelerate the process of lenders catching up on the backlog of foreclosures that has been building up over the last year and a half,” Blomquist said.

RealtyTrac projects foreclosures will rise 25 percent this year to 1 million homes. Last year, lenders took back 804,000 homes.

Credit rating agency Fitch Ratings also anticipates foreclosures will climb nationally this year but not right away, noting it will take some time for lenders and mortgage servicers to make sure they are in compliance with the rules set forth in the settlement.

“You probably are going to see the pace pick up as the year goes on,” said Grant Bailey, a managing director at Fitch.

Even so, the rise in foreclosures isn’t expected to be uniform nationwide. That is because the settlement isn’t likely to ease the backlog of foreclosure cases in states where courts play a role in the process. Also, states such as Nevada have taken steps to slow lenders down.

“I have yet to see any evidence banks are pursuing any foreclosures since the passing of (Assembly Bill) 284,” Las Vegas attorney John Boyer said. “I was told over a month ago the banks would be doing judicial foreclosures. This has not happened to my knowledge.”

The Nevada law, which went into effect in October, has contributed to fewer homes entering the foreclosure process and a smaller pool of foreclosed homes available for sale.

David Brownell of Keller Williams Realty in Las Vegas said real estate-owned, or bank-owned, inventory has decreased 50 percent from a year ago to 1,722 in January. He showed 1,587 escrow closings on REOs, a 16 percent decline from January 2011.

That is bringing multiple offers on foreclosures and other properties priced under $250,000, said Rosa Herwick, broker and owner of Century 21 JR Realty in Henderson.

“There are tons of homes sitting out here vacant that people haven’t paid on for two years, or whatever the case, that should be in the foreclosure pipeline and are not yet,” Herwick said.

All told, 210,941 U.S. homes received a default notice, were scheduled for auction or were repossessed by a lender in January, RealtyTrac said. That is up
3 percent from December but a drop of 19 percent from January last year.

The foreclosure rate translates to one in every 624 U.S. households.

Las Vegas has the fifth-highest foreclosure rate among metro areas with a population of 200,000 or more. One in every 172 properties got a filing in January.

Nine of the 10 other areas on that list are in California, with Stockton claiming the top spot for the fourth month in a row.

The Associated Press contributed to this report.