NEW YORK (MainStreet) — Foreclosure activity fell to a 42-month low in May as a sluggish housing market and even slower paperwork processing kept distressed properties from finding their way back to the market.
According to RealtyTrac, a housing market monitoring firm, foreclosure filings were reported on 214,927 properties last month, a 2% decrease from April and a 33% decrease from this time last year. That’s equivalent to one in every 605 American homes receiving a foreclosure filing in May.
“Foreclosure processing delays continue to mask the true face of the foreclosure situation, although there were some clues in the May numbers of what lies behind that mask,” James J. Saccacio, CEO of RealtyTrac, said in a written statement.
He explained that a spike in activity in certain states like New York and Indiana “provides evidence that lenders are somewhat unevenly pushing batches of bad loans through foreclosure as they overhaul their paperwork and documentation procedures and as they determine that some local markets are able to absorb more foreclosure inventory.”
Additionally, he said, the inventory of unsold real-estate owned (REO) properties increased in April and May even as new REO activity slowed during those months, indicating a continued weak demand for distressed properties.
Bank repossessions decreased for the second straight month in May, with 66,879 properties in the U.S. being repossessed by lenders that month — a 4% decrease from April and a 29% decrease from May 2010. Since the robo-signing controversy came to light in October 2010, REO activity has followed a rollercoaster pattern, with five monthly decreases and three monthly increases.
Last month, Rick Sharga, RealtyTrac’s senior vice president, told MainStreet that banks would be hesitant to repossess homes they didn’t think that they could sell quickly. He sees the same reality behind the most recent numbers.
“The numbers aren’t going up because the housing market is improving,” Sharga says. “If anything, they indicate that the recovery is going to take longer.”