US homes lost to foreclosure up 25 pct on year

AP Real Estate Writer

LOS ANGELES (AP) — Lenders took back more homes in August than in any
month since the start of the U.S. mortgage crisis.

increase in home repossessions came even as the number of properties
entering the foreclosure process slowed for the seventh month in a row,
foreclosure listing firm RealtyTrac Inc. said Thursday.

all, banks repossessed 95,364 properties last month, up 3 percent from
July and an increase of 25 percent from August 2009, RealtyTrac said.

makes the ninth month in a row that the pace of homes lost to
foreclosure has increased on an annual basis. The previous high was in

Banks have been stepping up
repossessions to clear out their backlog of bad loans with an eye on
eventually placing the foreclosed properties on the market, but they
can’t afford to simply dump the properties on the market.

are growing that the housing market recovery could stumble amid
stubbornly high unemployment, a sluggish economy and faltering consumer
confidence. U.S. home sales have collapsed since federal homebuyer tax
credits expired in April.

That’s one reason
fewer than one-third of homes repossessed by lenders are on the market,
said Rick Sharga, a senior vice president at RealtyTrac.

(properties) are going to come to market, but very slowly because
nobody wants to overwhelm a soft buyer’s market with too much
distressed inventory for fear of what it would do for house prices," he

As a result, lenders are putting off
initiating the foreclosure process on homeowners who have missed
payments, letting borrowers stay in their homes longer.

number of properties receiving an initial default notice – the first
step in the foreclosure process – slipped 1 percent last month from
July, but was down 30 percent versus August last year, RealtyTrac said.

Initial defaults have fallen on an annual basis the past seven months. They peaked in April 2009.

the number of homes scheduled to be sold at auction for the first time
increased 9 percent from July and rose 2 percent from August last year.
If they don’t sell at auction, these homes typically end up going back
to the lender.

More than 2.3 million homes
have been repossessed by lenders since the recession began in December
2007, according to RealtyTrac. The firm estimates more than 1 million
American households are likely to lose their homes to foreclosure this

In all, 338,836 properties received a
foreclosure-related warning in August, up 4 percent from July, but down
5 percent from the same month last year, RealtyTrac said. That
translates to one in 381 U.S. homes.

The firm
tracks notices for defaults, scheduled home auctions and home
repossessions – warnings that can lead up to a home eventually being
lost to foreclosure.

Among states, Nevada
posted the highest foreclosure rate last month, with one in every 84
households receiving a foreclosure notice. That’s 4.5 times the
national average.

Rounding out the top 10
states with the highest foreclosure rate in August were: Florida,
Arizona, California, Idaho, Utah, Georgia, Michigan, Illinois and

Economic woes, such as unemployment or reduced income, are now the main catalysts for foreclosures.

are offering a variety of programs to help homeowners modify their
loans, but their success rates vary. Hundreds of thousands of
homeowners can’t qualify or fall back into default.

Obama administration has rolled out numerous attempts to tackle the
foreclosure crisis but has made only a small dent in the problem.
Nearly half of the 1.3 million homeowners who enrolled in the Obama
administration’s flagship mortgage-relief program have fallen out.

The program, known as Making Home Affordable, has provided permanent help to about 422,000 homeowners since March 2009.

Regardless, many troubled borrowers have seen their efforts to get a loan modification stymied.

Book of Winter Garden, Fla., was one packet away from a permanent loan
modification from Chase under the Obama administration’s foreclosure
prevention plan after more than a year of back and forth and one failed

But his modification never went
through. Instead, his loan was transferred from Chase to IBM Lender
Business Process Servicers in July and he was told he owed $9,562.62
and must bring his mortgage current by Sept. 15 or foreclosure
proceedings will begin.

"It just becomes too
exhausting," Book said about the modification process. "That’s why some
people walk away. But I’ve invested too much and given up too much to
just let it go."

AP Real Estate Writer J.W. Elphinstone in New York contributed to this report.

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