The struggling U.S. real estate market may get a fresh kick in the legs from an increase in foreclosures in 2012 after an ebbing of the robo-signing controversy that slowed down repossessions in 2011.
"Foreclosures were in full delay mode in 2011, resulting in a dramatic drop in foreclosure activity for the year," said Brandon Moore, CEO of RealtyTrac, in its 2011 year-end report released last week. Moore added that "there were strong signs in the second half of 2011 that lenders are finally beginning to push through some of the delayed foreclosures in select local markets. We expect that trend to continue this year, boosting foreclosure activity for 2012 higher than it was in 2011, though still below the peak of 2010."
In an interview with Bloomberg, a RealtyTrac spokesman estimated repossessions to rise 25% in 2012, resulting in over a million home seizures in 2012 compared to 804,000 repossessions in 2011.
The robo-signing scandal involved banks such as JP Morgan, Ally Financial and Bank of America initiating foreclosures on the basis of fraudulently signed documents by employees who had not verified the information and who in many instances pre-dated notarized documents. State attorneys general are currently negotiating a $25 billion settlement with five large banks. The problem of shoddy documentation goes back over a decade, but came to light during the housing crisis, which produced foreclosures many times higher than normal volume. Foreclosures totaled 2.9 million in the peak year, 2010, six times as many as in 2005 before the start of the crisis.
