Scheduled foreclosure auctions in Mecklenburg County increased 46 percent in July compared with last year, after 19 consecutive months of annual decreases, according to data from RealtyTrac, a national real estate analytics company.
Also, the data indicated that more Charlotte area homeowners were in default on their mortgages in July than any time in the past five years, although RealtyTrac Vice President Daren Blomquist cautioned that figures on default notices may not be precise due to changes in June in the company’s data collection vendor.
So far, any uptick in early-stage foreclosure actions has not translated into an increase in completed auctions or properties that have reverted to bank ownership, both of which have been generally trending downward since around November 2012, according to the data.
The increase in scheduled auctions, he said, “is a sign to me that at least banks are moving forward with loans that had previously already fallen into default, but where the auction may have been delayed by loan modification, mediation or some other foreclosure alternative attempt,” said Blomquist. “The REOs (properties reverting to bank ownership after failing to sell at auction) are still down 50 percent from a year ago, continuing a long string of decreases, now 11 consecutive months, but I would expect the REOs also to rise in the next few months as those properties scheduled for auction actually go to auction and are repossessed by lenders.”
North Carolina’s total foreclosure activity was up 87 percent year over year, surpassed only by Alaska, Washington, D.C., Mississippi and South Dakota.
Nationally, foreclosure filings, including default notices, scheduled auctions and bank repossessions, were up 2 percent from June but down 16 percent from a year ago.
“July was the 46th consecutive month where U.S. foreclosure activity was down on a year-over-year basis,” said Blomquist. “After nearly four years of falling foreclosures, we are starting to see evidence that foreclosure numbers are normalizing at the national level. The 16 percent decrease in July was exactly half the annual decrease we saw a year ago in July 2013, when U.S. foreclosure activity was down 32 percent on a year-over-year basis. “
N.C.’s foreclosure starts were up 56 percent compared with July 2013, while completions were down 56 percent.
In the Charlotte Metropolitan Statistical Area over the past year, an average of 356 default notices were issued monthly, compared with a monthly average of 161 from August 2012 to July 2013 and 150 the year before that. The increase in default notices was largely responsible for a 48 percent year-over-year increase in total foreclosure activity for the area.
Several people involved in foreclosures say they do expect to see them rise in coming months, albeit not to the levels seen during the darkest days of the housing crisis. They also expect to see short sales rise in the coming months.
Among the reasons cited for an anticipated increase in foreclosures:
- Some loans that were modified five years ago under the federal Making Home Affordable Program to help homeowners weather the recession are reverting to their original conditions, and the homeowners are not able to meet the obligations;
- Some mortgage holders don’t qualify now for modification due to other debts incurred since the housing crisis hit;
- Rules that took effect in Jan. 1 that were designed to address problems faced by delinquent borrowers also helped to make lenders feel more comfortable that they were following federal guidelines in making the decision to initiate foreclosures.
“One regulation requires that servicers review someone for a loan modification if they submit their package 37 days before the (foreclosure) sale date,” said Harry Marsh, a Charlotte foreclosure defense attorney, in an email. “This regulation was probably enacted with the belief that it would require lenders to review people for loan modifications. They can’t tell someone two months before their sale date that it’s too late to help them. However, that wasn’t happening. Lenders like Bank of America were reviewing up to and until the last day.
“But now that a regulation is in place with a stated 37-day period, some lenders (and) servicers … use that as ammunition. Unless the borrower has a complete loan modification package submitted to them 37 days before the sale date, they believe they do not have to review them at all.”
In states that use the judicial foreclosure process, which takes much longer, 37 days can protect homeowners, he said. But in North Carolina and other nonjudicial states, where the process does not go through the court system, a sale date can be set 21 days after a foreclosure hearing.
“Around here, you can go from no court hearing or date to a sale date and already be too late to submit a loan modification package to your lender,” he said. “As opposed to a year ago, that is hurting a lot of people who haven’t been proactive about resolving their delinquency.”
Nancy Braun, owner and broker-in-charge of Showcase Realty, said the numbers could be a normal fluctuation. According to the RealtyTrac data, total monthly foreclosures for the Charlotte area in the past year have varied from 676 in February to 982 in August 2013.
But she believes that “in the next few years, you’re going to see some revival of foreclosures because the loan modifications are coming due.”
“It silenced a bunch of people for five years, but their circumstances didn’t change enough and their equity didn’t increase enough to relieve them of this burden,” she said.
She also thinks that short sales will begin to climb, in part because in neighborhoods that have faced a high rate of foreclosures, properties are not appreciating as much as they are in the metro area as a whole, leaving owners owing more than their houses are worth.
“Ten or 20 years ago, we didn’t talk about short sales,” she said. “Now we’re going to see them pick back up.”