Foreclosures slow down, but no end in sight

Foreclosure delays caused by processing and procedural problems have slowed drastically the number of legal filings leading to home forfeiture so far this year in Connecticut.

A report by California foreclosure tracker RealtyTrac said the number of Connecticut filings in the first six months dropped to 5,582 - less than half the number recorded in the first half of 2010. Similarly, the 3,267 filings recorded in the second quarter of this year were less than half of what was seen in the same period of 2010.

Nationally, foreclosure filings fell 32 percent in the second quarter and dropped 29 percent for the first half of this year.

"Processing and procedural delays are pushing foreclosures further and further out - we estimate that as many as 1 million foreclosure actions that should have taken place in 2011 will now happen in 2012, or perhaps even later," said James J. Saccacio, chief executive of RealtyTrac, in a statement.

While some might view the delayed foreclosures as a blessing, allowing people to stay in their homes longer, Saccacio said a continued high inventory of distressed homes only drags out the effect on the real estate market.

"This casts an ominous shadow over the housing market, where recovery is unlikely to happen until the current and forthcoming inventory of distressed properties can be whittled down to a manageable number," he said.

With unemployment rates rising, consumer confidence low and home sales and prices weak, he said the economy is not likely to drive an improvement in real estate any time soon. Foreclosure delays are only extending the time when a recovery might start, according to RealtyTrac, which is based in Irvine, Calif.

Controversies over such industry practices as "robo-signing" - quickly processing paperwork without doing the proper legal work - have caused state and federal regulators to consider new foreclosure rules that currently are being negotiated. Some mortgage processors have delayed their work until these rules are firmed up.

The National Association of Realtors reports that distressed homes in May accounted for 31 percent of existing home sales. These homes typically sell at a 20 percent discount compared with similar properties that are not facing foreclosure.

l.howard@theday.com