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Banks putting foreclosed homes into inventory

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10/12/2010 05:48 PM
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Banks putting foreclosed homes into inventory
Nevada foreclosure sales jumped dramatically in September, increasing by 39.2 percent from August, but the lion's share of the sales ended up in bank inventories, ForeclosureRadar reported Tuesday.

The number of foreclosure sales purchased by third parties was essentially flat during the month, while the majority went back to the bank at trustee sales, leading to an 8 percent increase in the inventory of bank-owned properties.

Nevada foreclosures filings were mixed with notices of default filings down 8.8 percent and notices of trustee sale filings up 6.5 percent in September, the online foreclosure tracking service showed.

In Clark County, the number of properties going back to the bank soared by 51.9 percent from the previous month and 31.9 percent from September 2009.

As a result, inventory of real estate-owned, or bank-owned, homes in the county rose 8.1 percent during the month. Preforeclosures -- homes on which a notice of default has been filed but no sale date has yet to be set -- fell 41.9 percent in September, but were still 10.8 percent above a year ago.

All of the states covered by ForeclosureRadar.com showed an increase in September foreclosures, but Nevada was significantly higher than the rest, said Sean O'Toole, chief executive officer of the Discovery Bay, Calif.-based website.

"There's not anything specific at this point," O'Toole said. "I'd say each lender is on their own schedule. I don't think it's a change in direction for servicers. One thing I will say is foreclosures tend to slow down during the holidays, so before and after that tends to be a little bit of a wave."

Five major lenders recently announced that they would suspend foreclosure activities in certain states because of legal questions over notarization of documents.

ForeclosureRadar has yet to detect any change in foreclosure sales in Nevada by these lenders through the week ending Oct. 8. That's not completely unexpected, O'Toole said, as the majority of this activity were limited to 23 judicial foreclosure states that do not include Nevada, Arizona, California, Oregon and Washington.

Sen. Harry Reid, D-Nev., last week urged lenders to place a moratorium on foreclosures in Nevada until they make sure homeowners aren't "improperly directed into foreclosure proceedings."

One of the lenders, Bank of America, said Friday it would stop sales of foreclosed homes in all 50 states as it reviews potential flaws in foreclosure documents.

"We regularly see lenders make minor mistakes in foreclosure filings," O'Toole said. "But the reality is that far more homeowners are behind on their mortgage payments than are even in foreclosure. The clear problem in the housing market today is not foreclosures, but negative equity. As long as the focus remains on the symptom rather than the disease, we will see little progress towards real solutions and this crisis will drag on for years to come."

Washoe County saw a 7.4 percent rise in bank-owned inventory for the month and a 38.5 percent jump in foreclosures set for an auction date.

Contact reporter Hubble Smith at [email protected] or 702-383-0491.