The majority of the states with the highest number of completed foreclosures for 2012 were nonjudicial foreclosure states, indicating that judicial foreclosure states are still plugging up the foreclosure pipeline.
Judicial foreclosure states require a court’s approval before a foreclosure can be finalized, while nonjudicial foreclosure jurisdictions offer a streamlined series of steps for parties to follow without a court’s approval.
Four nonjudicial states led the way in terms of completed foreclosures, with California posting 100,000 completed foreclosures in 2012, followed by Georgia with 49,000 foreclosures, Michigan (74,000) and Texas (57,000), according to a new report from CoreLogic.
The challenges facing judicial foreclosure states stem from the time it takes to get a foreclosure through the court system and also court capacity restraints, said Chief Economist Mark Fleming at CoreLogic.
Judicial foreclosure states require financial firms to handle default proceedings within an official court of law, while nonjudicial foreclosure states offer a set of rules and processes that are streamlined and designed to occur outside of court.
In particular, California foreclosure starts fell to the lowest level in six years during the fourth quarter of 2012 as a result of rising home vales and a shift toward short sales, DataQuick noted in a report.
“This trend alone suggests we’ll see a continued decline in foreclosure rates this year. Another factor is the foreclosure-avoidance goals of various settlements between lenders and the government,” said President John Walsh at DataQuick.
Vice President Daren Blomquist at RealtyTrac coined 2012 “the year of the judicial foreclosure.”
Foreclosure activity increased from 2011 in 20 of the 26 states that primarily use the judicial process, according to RealtyTrac’s year-end 2012 foreclosure market report.
Specifically, states dealing with foreclosure backlogs are more susceptible to continued processing delays including states such as Illinois, New Jersey, and Ohio, weighing on long-term housing gains.
Nonjudicial foreclosure states such as Arizona, California and Nevada are seeing significant decreases in foreclosure activity as well as “a clear bottom in home prices, so buyers are attracted to these markets because they have nowhere to go other than up,” Blomquist said.
In comparison, the five states with the lowest number of completed foreclosures for the year were District of Columbia at 89, Hawaii at 421, Maine at 537, North Dakota at 521 and West Virginia at 645, CoreLogic noted.
“The rate of foreclosures continues to trend down, albeit at a slower rate as we exit 2012,” said Anand Nallathambi, president and CEO at CoreLogic. “This trend should continue into 2013 and is another positive signal that the gradual healing process in the housing market is gaining traction.”
Additionally, the five states with the highest foreclosure inventory as a percentage of all mortgaged homes included Florida at 10.1%, New Jersey at 7%, New York at 5.1%, Nevada at 4.7% and Illinois at 4.5%.
In comparison, the five states with the lowest foreclosure inventory as a percentage of all mortgaged homes included Wyoming at 0.4%, Alaska at 0.6%, North Dakota at 0.7%, Nebraska at 0.8% and Colorado at 1%.