US foreclosures drop but storm clouds ahead

Foreclosure filings - default notices, auction sale notices and bank repossessions -- were reported on 259,085 properties in November, a seven percent drop from October, said RealtyTrac, a California-based group said on Thursday.

“Foreclosure activity in November hit the lowest level we’ve seen since June,” said James Saccacio, chief executive officer of RealtyTrac.

He attributed the drop in part to recently enacted laws that have extended the foreclosure process in some states along with flexible loan programs and other packages by lenders.

“There are several indications, however, that this lower activity is simply a temporary lull before another foreclosure storm hits in the coming months,” he said.

Delinquencies on loans not yet in the foreclosure process jumped to nearly seven percent in the third quarter, a record high, according to the Mortgage Bankers Association, Saccacio said.

“And more than half of the homeowners who received loan modifications to reduce monthly mortgage payments in the first half of 2008 are already delinquent on their loans again, according to the US Office of Thrift Supervision.

“Many of these delinquencies could turn into foreclosures next year,” he warned.

A collapse of the US home mortgage industry plunged the world’s most developed nation into financial turmoil, which spread across the globe and led to a sharp economic slowdown.

US mortgage giants Fannie Mae and Freddie Mac announced last month they had notified loan servicing organizations to freeze foreclosures until January 9, 2009. Banking giants had also announced similar measures.

RealtyTrac also said that Nevada, Florida, Arizona had the top foreclosure rates.

Nevada foreclosure activity in November decreased nearly four percent from the previous month, but it maintained the nation’s number one foreclosure rate, the report said.