The filing of home foreclosures reached the lowest level in five years, according to a new report released by RealtyTrac. While the drop in filings is largely attributed to a decrease in foreclosure activity in states hardest hit by the housing crisis, experts say an increase in short sales is also making a huge difference.
Home Foreclosures Reach Lowest Level Since 2007
The RealtyTrac report revealed that foreclosure filings in April fell for the third straight month.
The total activity for home foreclosures during the month — including default notices, scheduled actions and bank repossessions — was down 5 percent from March, according to the real estate and foreclosure database firm.
Bank repossessions in particular dropped to 51,415 (26 percent decline) from a year ago, as states like Arizona and California experienced significant drops in repossessions of 70 percent and more than 50 percent, respectively.
Short Sales Help Reduce Foreclosure Filings
Short sales — deals that allow borrowers to sell homes for less than the amount they owe on their mortgages — have contributed significantly to the major drop in foreclosure filings.
Big banks like Bank of America and Wells Fargo are pushing for these mortgage arrangements, even agreeing to offer homeowners cash incentives in exchange for selling their homes at a lower price. This route allows lenders to save money on higher costs compared to what they would pay by initiating foreclosures.
Another factor that experts say has contributed to the decline in foreclosure filings is the drop in activity in states that were not among that 26 states required to face judicial review of foreclosures after the robo-signing scandal of 2010. These states have already pushed through many of their home foreclosures, reducing the total number of filings nationwide.
Experts say, however, despite the reduction in filings the housing industry is not showing strong signs of recovery. With millions of homes already sitting empty around the country, home prices are still low leaving homeowners with underwater mortgages and struggling neighborhoods.