"The increase in overall foreclosure activity over the last five months has been driven primarily by rapidly rising bank repossessions, which in July reached the highest level since January 2013," says Daren Blomquist, vice president at RealtyTrac. "Meanwhile foreclosure starts in July were at the lowest level since November 2005 — a nearly 10-year low that demonstrates the recent rise in bank repossessions and represents banks flushing out old distress rather than new distress being pushed into the pipeline."
Indeed, Blomquist notes that "this clearing of old distress is evident in the fact that properties foreclosed in the second quarter had been in the foreclosure process an average of 629 days, the longest in any quarter since we began tracking in the first quarter of 2007. It's also evident that the recent surge in REOs is in fact clearing out more of the bad bubble-era loans from the so-called shadow inventory."
Sixty-one percent of the loans still in the foreclosure process were originated during the housing bubble years of 2004 to 2008, down from 68 percent last year and 75 percent two years ago, Blomquist says.
Bank repossessions last month were at a 30-month high, rising in 44 states. Still, REOs were less than half their peak of 102,134 in September 2010.
REOs have increased the most from a year ago in the following states:
New Jersey: +344%
Meanwhile, foreclosure starts have fallen to pre-crisis levels and are down annually in 31 states, RealtyTrac reports. In July, there were 45,381 properties that started the foreclosure process, down 8 percent month-over-month and down 9 percent from a year ago to the lowest level since November 2005. Foreclosure starts in July were less than one quarter of the peak of 203,948 reached in 2009.
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