(TheNicheReport) -- When the foreclosure settlement agreement between the five major mortgage lenders in the United States and the attorney generals was signed, approved and implemented earlier this year, real estate and mortgage analysts warned of a sudden avalanche of foreclosures. Alas, that has not been the case, according to a recent report from a leading mortgage servicing entity.
The report from Lender Processing Services (LPS) revealed that foreclosures are down by at least 30 percent compared to last year. The current number of foreclosure cases going to sheriff sales or judicial auctions is actually the lowest over the last two years. In states where foreclosures are not required to go through the court system, such as Utah, a sharp drop was also reported by LPS.
The numbers are certainly against expectations, but the reasons are valid. Loan modifications are the number one priority that banks have assumed in the weeks after the foreclosure settlement was approved by a federal court in New York. The lenders may be too busy devising a way to meet the terms of the agreement to concentrate on foreclosures at this time. Short sales are also being favored in greater numbers by the lenders, and thus many homes that were in limbo during the investigation previous to the settlement are instead heading to the closing table.
RealtyTrac, a mortgage and real estate analytics firm, reported that banks are giving preference to short sales in many housing markets, even as their real estate-owned (REO) are static. A reason for this is that investors are more interested in short sales where the property has been occupied, rather than dealing with homes in REO portfolios that have been abandoned and poorly maintained by the banks.
The most active markets for investors looking for short sales are Los Angeles, Phoenix and South Florida. Georgia is the real estate with the sharpest increase of short sales, 113 percent. Banks and realtors are certainly getting more adept at the short sale process, and investors are applauding this trend. The new climate for mortgage lending has been transformed by the foreclosure settlement, and banks are looking for ways to increase the value of their loan and REO portfolios with short sales and loan modifications.