Record plunge in foreclosures, thanks to robo-signers

NEW YORK (CNNMoney.com) — The number of foreclosure notices filed in November plunged 21%, the biggest month-over-month drop ever recorded by RealtyTrac, the online foreclosure marketer. Filings fell 14% compared with November 2009.

The number of Americans who actually lost their homes to bank repossessions plummeted even more steeply — to 67,428. That was off a whopping 28% from 93,236 in October. Repossessions are down a third since September.

The drop in total filings, which include notices of default, scheduled auctions and repossessions, followed a 4% decline a month earlier. RealtyTrac CEO James Saccacio attributed the downtrend to fallout from the recent robo-signing controversy.

“[That] forced lenders and servicers to hit the pause button on many foreclosures while they scrambled to revamp their internal procedures and revise or resubmit questionable paperwork,” he said.

Robo-signing exposed sloppy industry practices that critics charged violated state laws and regulations. Some lenders froze the foreclosure process for all their loans until they could check whether their procedures were flawed and make any needed corrections.

The robo-signing moratoriums were responsible for the lion’s share of the decrease in November filings, said Rick Sharga, spokesman for RealtyTrac.

“I wish the report was actually good news,” he said. “But it’s just an artificial drop. For most borrowers in foreclosure, it will be a temporary reprieve.”

As evidence, Sharga pointed out that in judicial foreclosure states, ones where courts are involved and where banks are most vulnerable to scrutiny over their foreclosure practices, filings dropped substantially more than in states where courts do not usually participate in foreclosure actions.

There were 34% fewer auctions scheduled in judicial states, month-over-month, compared with a 7% decline in non-judicial states. Even that small drop was probably driven by an excess of caution among the banks, Sharga said.

Already, the banks have begun to restart the foreclosure process. Bank of America announced last week that it was phasing out its moratorium.

Sharga discounted economic factors as a major contributor to the foreclosure notice drop. Unemployment remains stubbornly high, home prices have taken another dip and significant improvement in consumer confidence has been elusive.

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