Foreclosures plunge to five-year low in US recovery

May 17 (Bloomberg) -- Foreclosure filings in the U.S. fell to a five-year low last month as lenders sought to avoid seizing property and a housing recovery showed signs of taking hold.

The number of default, auction and seizure notices sent to homeowners in April totaled 188,780, down 14 percent from a year earlier and 5 percent from the previous month, according to RealtyTrac Inc. It was the lowest tally since July 2007, before the onset of the biggest housing crash in seven decades, the Irvine, California-based data seller said today in a report.

The “gradually rising foreclosure tide” forecast by RealtyTrac after a February settlement by the nation’s biggest mortgage servicers over faulty practices has yet to materialize, limiting the number of properties on the market and propping up prices. Banks are finding alternatives to home seizures, selling distressed property for less than the amount owed on the mortgage, known as a short sale, or modifying loans for borrowers struggling to keep up payments while an improving economy is helping to ease defaults.

“Things are getting better and the number of vulnerable households is going down,” Paul Willen, senior economist at the Federal Reserve Bank of Boston, said in a telephone interview. “The pool of borrowers is much more stable than it was two or three years ago.”

The U.S. mortgage delinquency rate fell in the first quarter to 7.4 percent, the lowest level in more than three years, the Mortgage Bankers Association said yesterday. The rate peaked at 10.1 percent in the first quarter of 2010 and was last lower in the third quarter of 2008, when it was 6.99 percent.

Tighter Inventories

Home prices in the U.S. rose 0.6 percent in March from the previous month, the first sequential advance since July and the third straight month-over-month gain excluding short sales and foreclosure sales, said mortgage data company CoreLogic Inc. Prices fell 0.6 percent from a year earlier, according to the Santa Ana, California-based firm’s index of home values.

Short sales have been the preferred means for lenders to dispose of distressed real estate in California, where they totaled 11,397 in January, compared with 8,821 foreclosure deals in that state, according to RealtyTrac. The tally in Arizona was 3,217 short sales to 2,776 foreclosures, while in Florida it was 5,014 to 3,959.

There were 35,816 short sales in the U.S. in January, compared with 38,443 foreclosure deals, RealtyTrac said.

The national home-price data belies improvements in many markets where “tighter inventories are beginning to lift home prices,” CoreLogic Chief Executive Officer Anand Nallathambi said in a May 8 statement.

Miami Area

A drop in properties for sale may also be reducing foreclosure deals, and helping to put a floor under prices. Home listings in the U.S. fell 22 percent to 2.37 million in March from a year earlier, a 6.3-month supply at the current sales pace that’s considered a balanced market, National Association of Realtors data show.

In the Miami area, March listings declined 34 percent from a year earlier and prices rose for the fourth straight month, with condos jumping 46 percent and single-family homes gaining 13 percent, according to the Miami Association of Realtors.

The $25 billion settlement over foreclosure practices between the five largest mortgage servicers, including Bank of America Corp. and JPMorgan Chase & Co., and attorneys general from 49 states has made servicers leery of incurring further legal action, said Daren Blomquist, a RealtyTrac spokesman.

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