Foreclosure Numbers for Q3 are Artificially High. Many observers of the real estate market are disturbed by a 20+% increase in foreclosures in the third quarter of 2011. If you merely look at numbers, this can be alarming but frequently (as in this case) the numbers themselves do not portray an accurate and total picture of the environment.
The spike in foreclosures was due in large part to the lifting of voluntary and involuntary moratoria on foreclosure filings. The robo-signer debacle and many states caused temporary bans on foreclosure filings. New Jersey for example lifted a ban on foreclosure filings in the third quarter after an extensive review of the current filings and the practices of certain lenders.
There is also no question that there are many, many more foreclosures that could be filed but the banks are waiting. It is unclear why the banks have not filed foreclosure in many instances since a Notice of Default may have been issued months and months prior. One thought is that banks do not want to add to the ever-expanding "shadow" inventory. If this is the case, they should facilitate more and more deeds in lieu (DIL) and short sale approvals - yet they are not doing this. I do expect the DIL to return in 2012.
I do not know what program various lenders will have for DIL but I do not from my sources at the major banks that there will be some form of return to DIL in 2012.
Paddy Deighan, J.D. PhD
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