Foreclosure activity in October rose 25 percent from a year earlier, although filings in California fell by double-digit percentage points for the second consecutive month due to a state law slowing the foreclosure process, according to a monthly report by RealtyTrac.
Foreclosure filings - default notices, auction sales notices and bank repossessions - rose by 5 percent from September to 279,561 in October, according to Irvine, California-based research firm RealtyTrac.
That means one in every 452 U.S. housing units received a foreclosure filing in October, the firm said in its report released on Thursday.
The California law, which requires lenders to contact homeowners and explore options to avoid foreclosure before initiating the process, took effect in early September and drove the state's foreclosure activity rates down, at a pace of 31.6 percent from August to September and 18 percent from September to October.
But in September, the California law helped drive the national foreclosure rate down, something that did not happen in October.
"Foreclosure activity in other places rose significantly enough to offset the drop in California," said RealtyTrac Senior Vice President Rick Sharga.
Years of lending to risky, or "subprime" borrowers that fueled the housing boom has created an unprecedented number of foreclosures due to the inability of many of those borrowers to pay their mortgages, particularly as interest rates reset and as plunging home values nationwide increasingly render properties worth less than the mortgage.
The numbers might also be showing the effects of the economic downturn, Sharga said. If they do not yet, they will soon.
"An economic downturn is traditionally a precursor to foreclosures, even in a normal foreclosure cycle," Sharga said. "This is not a normal foreclosure cycle by any means."
Moreover, California's law will likely not prevent most of the state's homes which are teetering on the brink of foreclosure from falling off the cliff, Sharga said.
Previous experience with similar laws in Maryland and Massachusetts attests to such laws' inability to make a material difference.
"For most homeowners, these laws just delay the inevitable," he said.
Help From Fannie, Freddie On the Way?
The markets that once lead the housing boom topped the foreclosure list in September.
Nevada posted the nation's highest foreclosure rate for the 22nd consecutive month in October, with one in every 74 housing units, or 14,483, receiving a foreclosure filing during the month -- more than six times the national average.
Arizona registered the second-highest state foreclosure rate. Filings were reported on 17,507 Arizona properties, an increase of 35 percent from the previous month and 176 percent from October 2007.
In Florida, one of every 157 units received a filing during October, the nation's third-highest state rate. A total of 54,324 Florida properties received a foreclosure filing during the month, an increase of 13 percent from the previous month and nearly 80 percent from last year.
However, the government unveiled a plan on Tuesday which, unlike California's law, could permanently reduce the number of foreclosures, Sharga said.
Homeowners facing foreclosure who are spending more than 38 percent of their income on mortgage payments could have monthly payments reduced by Fannie Mae and Freddie Mac, the two largest U.S. mortgage finance companies.
"The good news is that there are programs and facilities in place that could actually have a material effect of stemming the tide of foreclosures, but as always the devil is in the details," Sharga said, adding that he does not expect to see that effect until late in the first quarter of 2009.
RealtyTrac counts foreclosures by compiling the total number of properties with at least one foreclosure filing reported during the month. If more than one foreclosure document is filed against a property, RealtyTrac counts only the most recent filing.
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