Report: Foreclosures down sharply in March

The number of foreclosure properties sold at auction, or trustee sales, dropped steeply for the second straight month, a March report from online listing service ForeclosureRadar.com shows.

In Clark County, foreclosure sales to third parties decreased to 511 in March, down 43.4 percent from 903 a year ago; 509 homes were taken back by the bank, down 83.4 percent from 3,075 a year ago; and 1,176 foreclosure sales were canceled, down 56 percent from 2,672 a year ago.

Notices of default, the first step in the foreclosure process, decreased 77 percent to 1,136, and notices of trustee sale decreased 74.3 percent to 1,550. Average time to foreclose increased 22.4 percent to 404 days.

But foreclosure starts nationwide rose from the previous month, with the largest increases in Nevada, Washington and California.

The increase in foreclosure starts is especially interesting in Nevada, said Sean O’Toole, chief executive officer of Discovery Bay, Calif.-based ForeclosureRadar. Lenders almost halted the process completely after Nevada’s robo-signing law was enacted in October.

The increase in starts seen in March is directly attributable to Fannie Mae, one of few lenders to have filed any new foreclosures in Nevada since September, O’Toole said. Even so, it’s still homeowner associations that are initiating the vast majority of foreclosures in Nevada, he said.

Realtor Bryan Lebo of Lebo Group said he’s starting to see default filings climb to 40 to 60 a day, compared with 10 to 12 a day over the past six months.

“Regardless of what happens, even if NODs spiked today, we don’t see that inventory until six to nine months,” he said. “So it appears that house prices are going up and the market is strong, but it’s a false sense of security.”

The big problem, Lebo said, is banks are holding back on foreclosure inventory. He doesn’t see any notices of default filed by Wells Fargo and very few from Bank of America.

It’s easy to see why some analysts continue to predict a wave of foreclosures, O’Toole said.

That won’t happen because of financial regulations that were changed in 2008 to help banks remain solvent, he said. Before the Troubled Asset Relief Program, a government program to purchase assets and equity from financial institutions, the lender had to take a loss on the nonperforming loan when it went into foreclosure.

Under TARP, banks don’t take the loss until they actually foreclose on the loan. This essentially stalled the foreclosure activity as lenders started to use foreclosures as balance sheet management, O’Toole said. It’s in their best interest to delay foreclosures through whatever means necessary.

“Clearly we still have far too many homeowners in trouble, and with the recent attorney general settlement over robo-signing and other issues, it seems completely logical that a wave of foreclosures would follow. It won’t,” O’Toole said. “To reach the conclusion that there will be a wave of foreclosures, you have to assume that the banks either want to foreclose – they don’t – or will be forced to foreclose – they won’t. I don’t see that changing anytime soon.”

Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.