Foreclosure activity slowed in the last quarter of 2011 due to the passage of Assembly Bill 284. First, banks have been overwhelmed with the volume, and their procedures and staff have been overloaded with work, slowing the progress from default through resale after foreclosure. Then there is the ongoing scrutiny of the procedures used, the "robo-signing" controversy. It seems that there is some significant, but unknown, number of foreclosures undertaken without the proper scrutiny of documents. Reports are that around 1 million foreclosures happened in 2010. AB 284 will now require that banks sign an affidavit swearing that they have the paper trail of documents proving that they are in fact the current lien holder. And also that they have the correct signatures of the person at the bank having authority to sign those documents.
The slow down of foreclosures due to AB 284 makes many fear that it will further prolong what would otherwise be a natural recovery of the Las Vegas real estate market.
"Shadow inventory" is defined by Standard & Poors as those homes with owners 90 days or more behind on their mortgage payments. Currently that number is estimated at 2 million. Another reason for time lags in foreclosure is that banks are doing more in the way of loan modifications or short sales and taking longer to process them. It takes a while to gather all of the financial information and forge a deal among the parties, including those holding second and third mortgages. However, more careful procedures are showing results. While 80% to 85% of loan modifications in early 2008 re-defaulted, that number had decreased to 50% to 55% by the third quarter of 2009.
With slowdowns in processing, some markets have a great deal of inventory. New York has a 10 year supply, while Boston's inventory is at a 62 month supply and Miami is showing 60 months. It's not over yet, though some analysts see improvement in 2012.