NEW YORK (Reuters) - Foreclosure starts rose year-over-year in May for the first time in more than two years as banks resumed dealing with distressed properties after a mortgage abuse settlement earlier this year, data firm RealtyTrac said on Thursday.
The $25 billion settlement between major banks and states, formally approved in April, had been expected to jump-start foreclosure proceedings that were previously stalled by uncertainty about the liability of banks.
Overall foreclosure activity, which includes default notices, scheduled auctions and bank repossessions, affected 205,990 properties in May, a 9.1 percent increase from April.
The figure was 4.2 percent lower, however, than in May 2011, RealtyTrac said in a monthly report.
Foreclosure starts grew 12 percent from April and 16 percent on an annual basis after 27 straight months of year-over-year declines. Foreclosure starts were filed on 109,051 homes in May, the first month-to-month rise since March.
Bank repossessions increased 7 percent after sinking to a 49-month low in April, with 54,844 homes repossessed in May.
"That the May numbers were up the month after that settlement was completed is an indication that lenders are more confident that there are clear ground rules to foreclose now, so they can play by the rules," said Daren Blomquist, RealtyTrac's vice-president.
"The banks are getting to a place where they consider their foreclosure processing issues resolved, so they're confident enough to go ahead and push through more foreclosures," Blomquist said.
Blomquist noted the jump in foreclosure starts was not a sign that a new crop of borrowers was beginning to miss payments, citing figures from the Mortgage Bankers Association indicating new delinquencies fell in the first quarter of 2012.