Foreclosure Halt Stalls Repossessions

The housing market is seeing a fall in the number of repossessions, but the dip in the numbers may be due instead to the moratorium on foreclosures that banks had implemented in several states rather than to fewer properties actually being repossessed.

Bank repossession filings have dipped 8.7%, mostly due to the foreclosure halt. In general, foreclosure filings, such as notices of defaults, notices of auctions and auction sales, have also dropped 4.4 percent in October.

The moratorium came in the wake of allegations that banks have improperly foreclosed properties and speeded up foreclosure proceedings by forging signatures and affidavits. In response, the biggest US banks voluntarily suspended evictions and halted foreclosures to review their paperwork and loan documents.

Despite the slip in numbers, it is still believed that there could have been more bank repossessions if it were not for the imposition of foreclosure moratorium.

The month of September registered the highest number of repos with 102,000 homeowners losing their properties. This number had dwindled to 93,246 repossessions in October. The drop was the first since the market had posted increases in at least four of the six months prior.

But the October figures may not still reflect the full effects of the foreclosure freeze. It is expected a further drop in the number of repossessions in November.

Although bank repos may be dropping at the present, the decline could be temporary and actual improvements in the overall rates of foreclosures could still take months. Many borrowers are still on the verge of foreclosures due to overdue and delinquent loans. It’s expected that once the freeze is over and notices are sent to these homeowners, the figures will rise again.

The moratorium has prolonged the foreclosure process and it could take at least 6 to 9 months before a homeowner sees a notice of default.

But analysts see that the freeze may be an inventory scheme that banks had implemented in order to manage their number of foreclosures. Banks still have huge inventories of foreclosed properties and it could be more advantageous for them to prevent the increase in the number of their foreclosures than to shell out money to maintain new foreclosures.