Bank Repossessions Drive up July Foreclosures

By Lynn Adler August 12, 2010

NEW YORK (Reuters) - More Americans fell into foreclosure in July as a sour job market kept them from making payments, and banks took over homes at a near record pace.

Banks repossessed the second highest monthly number of homes ever last month, working through distressed loans already on their books rather than sharply stepping up new default notices, real estate data company RealtyTrac said on Thursday.

This reflects problem management instead of a fix of the root problem, said the company, which expects more than 1 million homes to be repossessed this year.

"What's driving most of the foreclosure activity is unemployment and other types of economic displacement," RealtyTrac senior vice president Rick Sharga said in an interview.

Banks took over 92,858 properties in July, up 9 percent in the month and 6 percent in the year. This was a shade below the peak of 93,777 homes in May, the largest since RealtyTrac began tracking repossessions in April 2005.

In 2005, before the housing bust, banks took over just about 100,000 houses, according to the Irvine, California-based company.

Overall foreclosure activity, including notice of default, scheduled auction and repossession, rose 4 percent in July from June. Actions were taken on 325,229 properties, with one in every 397 housing units getting a foreclosure filing.

"Repossessions coupled with the fact that we're still looking at 5 million seriously delinquent loans, many of which would normally already be in foreclosure, really suggests that what the banks are doing is managing inventory levels," said Sharga.

The Obama administration on Friday acknowledged it had underestimated the number of homeowners who fell seriously behind on mortgages even after getting government aid.

On Wednesday the Treasury Department expanded a program to help unemployed homeowners avoid foreclosure.

A measured flow of foreclosure sales keeps home prices from falling much more after plunging nearly 30 percent, on average, in four years, economists agree. Relatively tame single-digit price declines are now seen, with a flood of foreclosure sales at any one time seen unlikely.