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<h1 class="storyheadline">Foreclosure filings spike 71%</h1>
<h2 class="storysubhead">Third quarter numbers saw a sharp rise
compared to last year; in September, 81,312 homes were repossessed by
lenders.</h2>
<div class="storybyline">By Catherine Clifford, CNNMoney.com
staff writer</div>
<div class="storytimestamp">Last Updated: October 23, 2008: 11:32
AM ET</div>
<div class="storytext">
<p>NEW YORK (CNNMoney.com) -- The housing crisis still has a
choke hold
on America: In September, 81,312 homes were lost to foreclosure,
according to a report released Thursday.</p>
<p>RealtyTrac, an online
marketer of foreclosed properties, said that 851,000 homes have been
repossessed by lenders since August 2007.</p>
<p>In September, 265,968
troubled borrowers received foreclosure filings - such as default
notices, auction sale notices and bank repossessions. That's a decline
of 12% from <a linkindex="4"
href="http://money.cnn.com/2008/09/12/real_estate/foreclosures/"
target="_blank">the record high number of filings in August</a>, but
21% more than in September 2007.</p>
<p>All
told 765,558 foreclosure filings were made on U.S. properties in the
third quarter of this year - up 3% from the second quarter and 71% from
the same period last year.</p>
<p>"We have never seen a foreclosure
cycle like this one before," said Rick Sharga, Realty Trac senior vice
president. Other periods of elevated foreclosure rates have been
preceded by signs of economic weakness. However, "in this cycle, we
have foreclosure problems that have caused an economic downturn."</p>
<div class="instoryheading">States step up</div>
<p>The most recent monthly dip in foreclosure filings was caused
largely by decisions by several states to relax housing laws.</p>
<p>"Much
of the 12% decrease in September can be attributed to changes in state
laws that have at least temporarily slowed down the pace at which
lenders are moving forward with foreclosures," Realty Trac CEO James
Saccacio said in a statement.</p>
<p>For instance, California - one of
the states hardest-hit states in the housing crisis - has a new law
that requires banks to contact struggling homeowners at least 30 days
before delivering a notice of default. That's helped to drastically
slow the number of foreclosure filings in the state.</p>
<p>"In
September, we saw California [defaults] drop 51% from the previous
month," said Saccacio. "That had a big impact on the national numbers
since California accounts for a third of the nation's foreclosure
activity."</p>
<p>North Carolina passed a similar law, and notices of default
there fell by 66% in September.</p>
<p>Unfortunately,
even these extensions aren't saving most troubled borrowers. "The
intention is very worthwhile, but I think the net result in most cases
is simply delaying the inevitable," said Sharga.</p>
<p>"If a few
homeowners are able to stay in their homes as a result of the
legislation, then it had a positive effect," said Sharga. However, "the
longer you are in foreclosure, the harder it becomes to pay the debt
you owe to get out of foreclosure," he added.</p>
<p>Circumstances in
Massachusetts illustrate his point. That state enacted a law back in
May requiring lenders to give troubled homeowners 90 days notice before
initiating foreclosure, which pushed the number of foreclosure filings
it reported way down for several months. But in September, when the law
expired, filings spiked.</p>
<p>"Initial foreclosure filings in
Massachusetts jumped 465% from August to September after being much
lower than normal in June, July and August," said Saccacio.</p>
<p>Nevada
once again had the nation's highest foreclosure rate, with one out of
ever 82 homes in foreclosure. Florida had the second highest rate in
September, with one in every 178 homes in default. California came in
third, with one in every 189 homes there receiving foreclosure filling
last month.</p>
<div class="instoryheading">Waiting to see what's next</div>
<p>As
foreclosures continue to wreck havoc across the nation's housing
market, the U.S. government has announced unprecedented efforts to
absorb toxic debt and shore up investor confidence. The <a
linkindex="5"
href="http://money.cnn.com/2008/10/22/real_estate/help_for_homewoners/index.htm?postversion=2008102216"
target="_blank">"Hope for Homeowners" rescue bill went into effect
Oct. 1</a>
and will allow some troubled borrowers to refinance into mortgages
backed by the Federal Housing Authority. And more recently, a massive
financial rescue plan calls for <a linkindex="6"
href="http://money.cnn.com/2008/10/21/news/economy/paulson_poll/index.htm?postversion=2008102206"
target="_blank">Treasury to buy up troubled assets, mostly backed by
bad loans, to stabilize the financial system</a>.</p>
<p>However,
as home buyers and lenders wait to see the effects of the plans, "there
is a lot of uncertainty in the market right now," said Sharga.</p>
<p>Still, he thinks that the market could be nearing a bottom,
even as uncertainty remains high.</p>
<p>"If
everything goes right, we will be done with almost all the subprime
loans by sometime in the first quarter of 2009," said Sharga. "The
market could start to stabilize at that point."</p>
<p>The bad news: The
housing market will be flooded with bank-owned homes. "We are
estimating that by the end of this year, between one quarter and one
third of all homes for sale will be bank owned properties," he said.</p>
<p>That
could push down prices even more, perpetuating a vicious cycle, but it
might also start to attract bargain hunters who may absorb some of the
massive housing inventory. <a linkindex="7"
href="http://cnnmoney.printthis.clickability.com/pt/cpt?action=cpt&title=Foreclosure+filings+spike+71%25+in+3rd+quarter+-+Oct.+23%2C+2008&expire=-1&urlID=31895100&fb=Y&url=http%3A%2F%2Fmoney.cnn.com%2F2008%2F10%2F23%2Freal_estate%2Fforeclosures%2Findex.htm%3Fpostversion%3D2008102305&partnerID=2200#TOP"><img
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border="0" height="7" width="7"></a></p>
<div class="storytimestamp">First Published: October 23, 2008:
5:01 AM ET</div>
<div style="margin-top: -10px;"><a linkindex="8"
href="http://money.cnn.com/pf/rates/" target="_blank">Find mortgage
rates in your area</a></div>
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