RealtyTrac Reports Q3 Foreclosures Hit All Time Record... Just In Time For The Plunge

Tyler Durden's picture

Looks like someone may have had a little advance notice on October's foreclosure semi-moratorium festivities. According to RealtyTrac, September foreclosures marked a 5 month high of 347,420, jumping 3% from the previous month and 1% from September 2009, even as the 3rd quarters marked the highest foreclosure activity on record. For the first time in history, bank repossessions (REOs) surpassed 100K, hitting 102,134. Providing some much needed color on what is actually happening in the foreclosure market, James Saccio, CEO of RealtyTrac said: "Lenders foreclosed on a record number of properties in September and in the third quarter, taking a bite out of the backlog of distressed properties where the foreclosure process was delayed by foreclosure prevention efforts over the past 20 months. We expect to see a dip in those bank repossessions — and possibly earlier stages of the foreclosure process — in the fourth quarter as several major lenders have halted foreclosure sales in some states while they review irregularities in foreclosure-processing documentation that has been called into question in recent weeks." And plunge, foreclosure activity will: the 24 judicial foreclosure states most affected by the foreclosure documentation issue accounted for 40 percent of all foreclosure activity in the third quarter and 36 percent of bank repossessions, or REOs. And the worst part is precisely what Jim Cramer thought was going to represent a boost to home prices, confirming just how little the man understand basic market principles: "If the lenders can resolve the documentation issue quickly, then we would expect the temporary lull in foreclosure activity to be followed by a parallel spike in activity as many of the delayed foreclosures move forward in the foreclosure process. However, if the documentation issue cannot be quickly resolved and expands to more lenders we could see a chilling effect on the overall housing market as sales of pre-foreclosure and foreclosed properties, which account for nearly one-third of all sales, dry up and the shadow inventory of distressed properties grows — causing more uncertainty about home prices.” In other words: a complete housing market collapse.

The chart below summarizes the monthly foreclosure activity by type (NOD + LIS, NTS+NFS, and REOs):

Some more details from RealtyTrac:

Foreclosure Activity by Type

During the quarter a total of 269,647 properties received default notices (Notices of Default or Lis Pendens), a decrease of 1 percent from the previous quarter and a decrease of 21 percent from the third quarter of 2009, when default notices peaked at more than 342,000.

Foreclosure auctions were scheduled for the first time on a total of 372,445 properties during the quarter, the highest quarterly total for scheduled auctions in the history of the report. Scheduled auctions increased 5 percent from the previous quarter and were up 4 percent from the third quarter of 2009.

Bank repossessions (REOs) also hit a record high for the report in the third quarter, with a total of 288,345 properties repossessed by the lender during the quarter — an increase of 7 percent from the previous quarter and an increase of 22 percent from the third quarter of 2009.

Nevada, Arizona, Florida post top state foreclosure rates in third quarter
As it has for the past 15 quarters, Nevada continued to document the nation’s highest state foreclosure rate in the third quarter of 2010 despite a year-over-year decline in foreclosure activity. One in every 29 Nevada housing units received a foreclosure filing during the quarter, almost five times the national average. Nevada foreclosure activity increased nearly 1 percent from the previous quarter but was down nearly 20 percent from the third quarter of 2009.

Arizona posted the nation’s second highest state foreclosure rate for the fifth consecutive quarter, with one in every 55 housing units receiving a foreclosure filing, and Florida posted the nation’s third highest state foreclosure rate for the fourth consecutive quarter, with one in every 56 housing units receiving a foreclosure filing.

With one in every 70 housing units receiving a foreclosure filing during the third quarter, California documented the nation’s fourth highest foreclosure rate, followed by Idaho, with one in every 86 housing units receiving a foreclosure filing during the quarter. A total of 7,424 Idaho housing units received a foreclosure filing during the quarter, an increase of nearly 20 percent from the previous quarter and an increase of nearly 14 percent from the third quarter of 2009.

Other states with foreclosure rates ranking among the top 10 in the third quarter were Utah, Georgia, Michigan, Illinois and Hawaii.

Five states account for more than 50 percent of nation’s third quarter total
California alone accounted for 21 percent of the nation’s total foreclosure activity in the third quarter, with 191,016 properties receiving a foreclosure notice — the nation’s largest foreclosure activity total. California foreclosure activity decreased nearly 1 percent from the previous quarter and was down nearly 24 percent from the third quarter of 2009.

Florida foreclosure activity increased 12 percent from the previous quarter and was flat from a year ago, giving the state the second largest foreclosure activity total, with 157,026 properties receiving a foreclosure filing.

With 49,103 properties receiving a foreclosure filing in the third quarter, Arizona posted the nation’s third largest state foreclosure activity total. Arizona foreclosure activity increased nearly 8 percent from the previous quarter but was down 2 percent from the third quarter of 2009.

Illinois posted the nation’s fourth largest foreclosure activity total, with 47,802 properties receiving foreclosure filings, and Michigan posted the nation’s fifth largest foreclosure activity total, with 46,100 properties receiving foreclosure filings. Foreclosure activity in both Illinois and Michigan increased on a quarterly and annual basis in the third quarter.

Other states with foreclosure activity totals among the nation’s 10 highest were Georgia (41,231), Nevada (38,429), Ohio (36,677), Texas (34,187) and Washington (17,670)

And just like an inverse cash for clunkers, look for the mid-November update on October numbers to be a 50%+ plunge in numbers, especially in the Notice of Trustee and Foreclosure Sale categories.

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HungrySeagull's picture

Yet more mountains of Papers which must now be rechecked for everything all over again to ensure the basic data is valid. It no longer matters if 350,000 is out of a home or one million is out of a home now does it?

There should be a new song nationwide to boost morale.

"I want my Mortgage Title Checked, and I wanted it CHECKED NOW!"


(Sorry Wentworth...)


300,000,000 singing the same song as the Tusnami of Forclosures sweep this great land from coast to coast, sea to sea should sort things out eventually.


What about the Commercial Properties?


What about the Banks themselves? One bank I know of near me is trying to lease out a second floor of a branch to bring in income and they no longer have sufficient staff to justify the use and expense of a second floor office complex.


Something to think on.

midtowng's picture

What is going to happen to the economy when the housing market completely freezes up? Let's face it: this will eventually be sorted out by the government, but we are in election season. Nothing important will be decided until mid-January at the earliest. That's three months of this thing getting gradually worse.

Double-dip? Hell, next leg down.

Founders Keeper's picture

[Nothing important will be decided until mid-January at the earliest.]

Midtowng, I expect a great many important things will happen during Congress' lame-duck session.  A great many bad things.  Keep an eye on the quiet back door deals in D.C. made under the cover of holiday distractions.

(IMHO, we are not at the end of a recession, or at the beginning of a double dip recession.  We are in the early stages of a catastrophic depression.)

God help us to help one another.


bronzie's picture

"We are in the early stages of a catastrophic depression."

probably about the 2nd inning

radish juice's picture

The same govt that was trying to stall/avoid foreclosures will start measuring housing recovery by completed foreclosures in a few months, just like they are trying to create inflation now they will long for foreclosures to begin to kick start housing.

Iuubob's picture

Don't blame this one on the govt, the banks own this one and it's a doozy


EscapeKey's picture

The cynical side of me wants to point out that the government is a branch of the banks.

I start to think the middle road is letting another big bank collapse. It would send the signal to the banks that they're not indespensible, and it would send a signal to the markets that the government draws a line in the sand with regards to irresponsible behaviour - all the while without actually doing anything about the deficit.

So, Citi, JPM, BoA or Wells Fargo? Or even Goldman Sachs... or more likely, Morgan Stanley. Who's up next on the chopping board?

Moonrajah's picture

Yeah, excatly who would Lehman'ed this time?

From the numbers I think it should JPM, but for all I know they could find some small-fry a'la Waddell and Reed, and leave him in the cold.

Go long popcorn, this is probably the Black Swan everyone was waiting for. Heck, it already overshadowed to Mexican Gulf fiasco.

Bob's picture


If I were stockholders--or auditors--I would demand that the banks hold back all that "bonus money" ($144B) as reserves against foreseeable losses (whether from write-downs or legal settlements) that would otherwise jeapordize the very survival of the firms. They have no contractual claim for Gov bailouts. 

The news is out.  There is no way the banksters meet their fudiciary duties if they pay out that bonus money. 

Under the circumstances, it would clearly constitute looting the companies.


Moonrajah's picture

If I were stockholders--or auditors--I would demand that the banks hold back all that "bonus money" ($144B) as reserves against foreseeable losses

Blasphemy, I tell you!

Never part a lioness from her cub,

Never part a woman from her illusions,

And never EVER even think about parting a banker and his hard-earned bonus!

EscapeKey's picture

What a ridiculous thought - that would mean all the "talent" would leave one bankrupt bank, and go to another - also bankrupt - bank. We can't have that without civilization collapsing.

TuesdayBen's picture

Had Barney and his Gubmint buddies not pushed into housing sector via Fan  and Fred, there would have been no bubble.

buzzsaw99's picture

Yeah, without those foreclosures coming back on the market there will be no houses for sale. lulz

BobWatNorCal's picture

So you're saying average prices per sale will rise?
I expect that will be spun as an improvement.

EscapeKey's picture

Who on earth would want to buy a house given the current state of turmoil? There is no way this is bullish.

BobWatNorCal's picture

A way will be found to say it.
It just won't be true.

BobWatNorCal's picture

Still, at a certain point, you may face the question, "do you want paper dollars or do you want a house?".

It feels closer to an endgame.
Who wants to be holding dollars?

Moonrajah's picture

do you want paper dollars or do you want a paper house?


There! Fixed that for you.

EscapeKey's picture

Who will be able to get an affordable mortgage?

Winterfreak's picture

What happens when a fraud-closed property was purchased but that buyer is now selling - but the original foreclosuree's (if that is a word) find out it wasn't done correctly?

How far down the chain will it go?!

TheMonetaryRed's picture

Hang on, isn't the robosigning scandal good for housing (right up until that moment it is decidedly not good)?

I mean, simple arithmetic: fewer foreclosures, less available inventory. 

And won't new housing (thus without title problems) should benefit, no?

Sure, we're keeping a massive unforeclosed inventory out there, but so what? The marks don't move on the banks' books (I mean, until they do, quickly). 

Meanwhile, homeowners reliquify - we hope. 



Tyler Durden's picture

No: less supply needs at least flat demand for a rising price. Problem is, and this is what Cramer can't grasp, is that even if supply drops it will be irrelevant, as demand goes to zero on complete and total uncertainty, especially if title insurers refuse to come back.

Oracle of Kypseli's picture

That could be a bonanza to builders. Clear title, new house, but questionable price.

DarkMath's picture

Why build a house now if you strongly suspect you'll be able to take your pick in a couple of years. In other words demand has dropped for more reasons than just fear of a faulty title. Demand is dropping because potential buyers are seeing blood in the water and don't want come in too early because there's chance prices will fall from here. If a bank is desparate to sell now then they're going to be really desparate to sell next year when they have a year of what were to have been already foreclosed houses on their books.

Plus the Fed through QE2 is virtually guaranteeing it will try to lower rates EVEN FURTHER. I've heard a 30 year mortgage could get as low as %2.5. That's what they are in Japan these days.

So if I'm a potential home buyer there's a lot of reasons to suck it up and spend another year in an incredibly cheap rental.

HungrySeagull's picture

If you have a nice quiet place somewhere that is a wee bit too far to walk from any major urban area, you dont need concern yourself with selling. Your rotting wood shingles can be replaced with a bit of labor and some good hard wood trees. Your Plumbing can be installed for rather cheap because there are dozens of hungry plumbers ready to take your call. You can keep the outhouse ready until really hard times hit. And the food? Well, If you can buy Lead Organ Pipes or such hardware that is being discarded by Churches desperate to stay out of foreclosure you might have a supply sufficient to make your own ammunition for a long time to come.


If the rooms are drafty? Have all your family come and live with you. They can do whatever they need to do quickly to make themselves (And you) comfortable.

If you prosper with this, not only you will own a home, but you will now be overseeing a Plantation with much self sufficiency as it used to be in this great Country centuries ago.

Conrad Murray's picture

Using a church's desperation brought on by financial hardship to reap lead organs at fire sale prices in order to make ammunition?  Priceless.

Chito Campo's picture

I dare say if you're buying a house to live in for 5-10 years then short-term (relatively) depreciation isn't a huge concern.  Not everybody is looking to flip their house in two years - people buy for purely emotional reasons, because they want a home, or they might be completely ignorant about what's going on in the market.

I'm not saying you're incorrect about the general dynamic as I'm sure things will play out this way but I doubt the dip will be as pronounced as the prognositcations are calling for since necessity, ignorance, and the female nesting instinct will continue to drive sales. 

Iuubob's picture

Spot on, this morass simply exacerbates the problem.  Why is that a mystery to folks.  Further, the cost of sorting out this mess will come at a high price for banks.

Oligarchs Gone Wild's picture

What is happening to real estate is what is happening to equities. 

What we have here is not a lack of demand, it is a vote of no confidence consummated through the constant parade of fraud by those who should be in charge.

TheMonetaryRed's picture

Agreed on one point: The words "Title Insurance" just went from being two of the most-boring to two of the most-exciting words in America. 

JPM has cracked MERS. If title insurers crack, it's gonna be a bumpy ride. 

MachoMan's picture

The title insurance guys were the ones that did the title searches/abstracting for the insurance on the foreclosure sales...  and for the original homeowner's purchase...  whatever defects in title there should have been, were there for title companies to see...  can't get that genie back in the bottle though...  prospectively, they can limit exposure...  retrospectively, they need to lube up.

HarryWanger's picture

as demand goes to zero on complete and total uncertainty...

That's an assumption. I really can't see how this would affect demand too much. REO's are being bought by speculators and, yes, flippers. Regular Joe is buying, not very many albeit, regular homes for sale. Might add some uncertainty but I can't see it creating a situation where demand "goes to zero". That seems a bit extreme.

bob_dabolina's picture

Demand going to zero only requires a loss of faith in the system.

Would you buy a foreclosure if you thought the previous owner was also entitled to the same property? No.

This could create a problem with title insurance. If (big if) refuse to insure titles because of fraud by banks than mortgage issuance stops (as in dead in it's tracks)

Now, if we have a problem with foreclosures that happened under fradulent pre-tenses than we have a complete different problem. The people who thought they had a home, might not have a home, and the previous owners might be entitled to moving back in. 

The litigation alone could last for years.

reading's picture

Just about everything is an assumption Harry.  The vast majority of homes in inventory are bank owned -- regular joe has most certainly been buying them and now that two of the 5 title insurers have said no thanks to bank owned properties that will make it additionally difficult to move properties.  And let us not forget, that even if they can get the process re-started in a "short time" (read: few months?) everyone currently in the process will be re-starting -- requalifying (already difficult and credit scores change rapidly for people and not up in many cases), wading through all the paperwork, etc.  This has already started impacting demand -- just ask around.


techperson's picture

If the dollar falls fast enough, and foreclosuregate delays legal proceedings long enough, house "values" in depreciating dollars will go high enough to turn the underlying equity positive, maybe big time.  Then you'll see a REAL war as it actually becomes profitable for the banks to foreclose and resell the house, instead of having to take a loss as they now do.  This is going to happen fast.

Iuubob's picture

I am befuddled by your comment.  It quite simply , makes no sense.


MachoMan's picture

I think he missed the whole bi-flation memo/easy observations out his window...  where debt laden assets are decreasing in price...  and will continue to do so regardless of the value of the dollar...

Village Idiot's picture

I remember Cramer telling his audience that he wanted to buy in Palm Springs, but missed the boat as the market was already turning - as evidenced by the limited number of "For Sale" signs - compared to his previous visit.  That show ran more than a year ago. Jim is a RE guru.

gwar5's picture

Oh, so that sound we've been hearing getting louder and louder is the actual sound of the SHTF. 

LeftCoastRefugee's picture

As someone who works REO daily (not at a bank) the buyers have plenty to pick from and are still not buying as the uncertainty of the shadow inventory on future values is causing serious concern before the current fraudclosure. As Tyler stated, this will amplify the concern. It's going to be a slow winter.

HungrySeagull's picture

And possibly a difficult winter as said buyer sleeps on a warm mound of money ready to buy a home, but only there are no homes with clear title and no encumberances of any kind.

Surely among the thousands of rotting homes there must be one or two good priced homes to sell to this buyer so that you may eat this coming winter.

Oh where, oh where are the good homes without the paperwork bull and fraud?

LostWages's picture

"And possibly a difficult winter" -- Kondratieff Winter that will last for years.

HungrySeagull's picture

I wonder for a moment if Land will get so cheap that Developers will now build nice small homes in the manner that the People would be pleased to own and live in knowing that these homes are fresh built, clean inside and out and so forth.


Even though we are going through a winter, I think there is going to be a one hell of a Spring if enough home builders buy the right land and accumulate the materials needed to make this happen.


I hear talk of China make stake in our Oil and Gas down by Antonio way in the heart of Texas. I wonder if China will now use her riches to buy land and ship cheap labor and materials over and build our homes for us, as they once built the railroads.

Titles and paperwork would not be a problem. It will be a single document pledging allegiance to the Dragon along with your revenue.

Village Idiot's picture

It's going to be a slow winter.