Mortgage Default Notices Jump to Largest Monthly Increase in 4 Years

Mortgage default notices on U.S. homes have seen the biggest monthly increase in four years, according to a new report from RealtyTrac. The real estate data provider found that first-time default notices filed last month jumped 33 percent from July.

Default Notices Reach 9-Month High

Thursday, RealtyTrac announced a larger number of homes received first-time default notices in August. An estimated 78,880 homes last month were contacted, marking a nine-month high. It was also the biggest increase seen since August 2007.

Even with this surprising increase in foreclosures, the report found that notices were down on the whole. They dropped 18 percent from the same month last year and were down 44 percent from the monthly peak reached in April 2009.

Housing Market Still Making Slow Recovery

The rise in foreclosures makes it appear there was also an increase in the number of people who could not pay their mortgages. While the number of defaults is still high, RealtyTrac says that this increase signals a different problem in the market.

Robo-signing issues became prominent in 2010 after it was discovered that many lenders had been illegally pushing foreclosure documents through without proper authorization from courts. As a result, lawmakers asked lenders to freeze their foreclosure processing until they could ensure that filings and repossessions were legitimate.

Now “unfrozen,” much of that documentation is making its way through the pipeline.

Rick Sharga, senior vice president at RealtyTrac, told CNBC.com that there are about 3.5 million mortgage loans that should be in foreclosure but aren’t. It should still take several months for them to filter through. Once that happens, he says, we may finally be able to take steps toward housing market recovery.