Foreclosure starts fell on annual basis in August

Associated Press Modified: September 13, 2012 at 8:15 am •  Published: September 12, 2012
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LOS ANGELES (AP) — The evolution of the U.S. foreclosure crisis is increasingly diverging along state lines.

On a national level, fewer homes were placed on the foreclosure track last month than in August last year, when they hit a 17-year high, foreclosure listing firm RealtyTrac Inc. said Thursday.

At the same time, so-called foreclosure starts increased almost exclusively in states like Florida and New York, where the courts must sign off on foreclosures, the firm said.

Conversely, in many so-called non-judicial states, like California and Arizona, the number of foreclosure starts declined versus August last year.

The pace of homes entering the foreclosure process is expected to decline gradually, barring another severe economic shock that sends the slowly rebounding housing market into a tailspin, experts say. But that decline is likely to continue playing out unevenly, in part because of the differing approaches to handling foreclosures from state to state.

In addition, some states have passed laws that effectively slow down the process, creating a backlog of foreclosure cases that will take longer to wade through.

Foreclosure activity has been declining in most non-judicial foreclosure states because they didn't build a huge backlog of pending cases during an industrywide slowdown in foreclosures last year. The slowdown stemmed from widespread claims that lenders had been processing foreclosures without verifying documents.

The slower process in states where courts play a role in foreclosures contributed to a logjam of pending foreclosure cases that now has lenders playing catch-up.

All told, 99,405 homes entered the foreclosure process in August, up 1 percent from July, but down 13 percent from August last year, RealtyTrac said.

The latest figure shows a marked slowdown in foreclosure starts since they peaked in April 2009 at about 203,000. But they're still well above the 34,000 recorded in May 2005, before the housing bubble burst.

Foreclosure starts posted annual increases in 18 states — mostly in those where courts are involved in foreclosure cases. One of the exceptions was Washington state, a non-judicial state where foreclosure starts more than doubled.