More U.S. homes are entering the foreclosure process, but they’re taking longer to get sold or repossessed by lenders.
The number of U.S. homes that received a first-time default notice during the July to September quarter increased 14 percent compared to the second quarter.
That increase signals banks are moving more aggressively now against borrowers who have fallen behind on their mortgage payments than they have since industry-wide foreclosure processing problems emerged last fall. Those problems resulted in a sharp drop in foreclosure activity this year.
The surge in default notices means homeowners who haven’t kept up their mortgage payments could now end up on the foreclosure path sooner. Initial default notices are the first step in the process that can eventually lead to a home being taken back by a lender.
A pickup in foreclosure activity also means a potentially faster turnaround for the U.S. housing market. A revival isn’t likely to occur as long as there remains a glut of potential foreclosures hovering over the market.
The third-quarter increase in initial defaults was largely a product of a spike in August.
Still, the jump in initial defaults during the July to September period is significant because it is the first increase after five consecutive quarterly declines, suggesting banks are gradually addressing their backlog of homes in foreclosure and are now beginning to move on more recent home loan defaults.