Nevada foreclosure filings surge in August

Lenders filed notices of mortgage default on 5,279 Clark County homes in August, sharply reversing a six-month slide in foreclosure actions, real estate tracking firm ForeclosureRadar reported Wednesday.

The sudden spike of nearly 46 percent in default notices -- the initial step in foreclosure -- since July signals that banks are starting to move against homeowners nearly a year after they were forced to back off while sorting out problems with sloppy and improperly handled loan documents.

Nevada continues to lead the nation in foreclosures, with one in every 118 households receiving a foreclosure-related notice last month, RealtyTrac Inc. said in a report scheduled for release today.

Though default notices surged last month, they fell 13.7 percent short of the 6,116 notices filed in the same month a year ago, ForeclosureRadar reported.

The jump in initial default notices in Las Vegas was mirrored by a 33 percent increase nationwide, a nine-month high and the biggest monthly gain in four years, RealtyTrac reported.

The surge in foreclosure filings is primarily attributed to Bank of America, the nation's single largest lender, which is moving forward on troubled mortgages where paperwork was found to have been improperly "robo-signed" by bank employees, ForeclosureRadar Chief Executive Officer Sean O'Toole said Wednesday.

Banks are fighting legal battles against states and the federal government over the foreclosure process and are having to play "catch-up," O'Toole said.

"It's possible that they are clearing up files that were set aside during review of the robo-signing," the foreclosure analyst said. "If that's the case, I think this will be a one-month blip of cleanup."

But RealtyTrac Senior Vice President Rick Sharga said it may be just the start.

"This is really the first time we've seen a significant increase in the number of new foreclosure actions," Sharga said. "It's still possible this is a blip, but I think it's much more likely we're seeing the beginning of a trend here."

Foreclosure filings also increased for Wells Fargo and US Bank, while filings by JP Morgan Chase and Citibank were essentially flat.

Notices of trustee sale in Las Vegas, the next major step after a default notice, declined 8 percent for the month and 44.8 percent from a year ago, to 3,108 in August. That fifth consecutive month decline is likely to reverse when August's rush of defaults reach that step.

Investor activity increased in August. Properties sold at auction to third parties rose 17.3 percent, to 699, while those going back to the bank -- commonly known as real estate-owned -- increased
1.4 percent, to 1,555. Cancellations of default notices fell for the fourth straight month, dropping 9.1 percent in August to 1,540, the lowest number in 15 months.

Time to foreclose reached a record of 373 days in August.

While painful for homeowners, the foreclosure process is seen as a necessary step in turning around the U.S. housing market. Experts say a revival isn't likely to occur as long as there remains a glut of potential foreclosures .

Foreclosures weigh down home values and create uncertainty among would-be homebuyers who fret over prospects that prices may further decline as more foreclosures hit the market. About
3.7 million more homes nationwide are in some stage of foreclosure now than there would be in a normal housing market, Citi analyst Josh Levin said.

"This bloated foreclosure pipeline now presents the greatest obstacle to a housing market recovery," Levin said in a client note this week.

Las Vegas-based housing research firm SalesTraq showed a bank-owned inventory of 10,478 foreclosed homes in July, compared with 13,370 a year ago. Bank repossessions totaled 1,502 during the month, a 7 percent decrease from the same month a year ago.

Hope Now, an alliance of mortgage insurers and servicers, reported 3,523 foreclosure starts in Nevada in July, down from 4,195 in June. Completed foreclosure sales dropped to 1,972 in July from 2,773 in June.

Servicers completed 603 proprietary loan modifications in July, excluding modifications through the Home Affordable Mortgage Plan, HAMP, compared with 633 in June.

The Associated Press contributed to this report. Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.