Foreclosure activity stalls, properties in limbo

Irvine, Calif.-based RealtyTrac reports 7,685 foreclosure filings in Arkansas during 2011. The distressed mortgage activity across the Natural State declined 61% from the prior year.

In the Fort Smith region, Sebastian and Crawford counties posted 350 new filings last year, a 71% decline from 2010. North of the Bobby Hopper Tunnel, Washington and Benton counties reported 1,786 new filings in 2011, a 59% drop from the prior year, according to RealtyTrac.

The sharp decline is related in part to a federal court ruling that has virtually halted foreclosure transactions in the state since October.

On Sept. 29 U.S. Judge Audrey Evans (Eastern District) ruled that only lenders “authorized to do business in the state” can use the non-judicial method of foreclosure. She cited statute 18-050-117 in the Arkansas Code, which became law in 2003. The vast majority of foreclosures have historically been non-judicial, an abbreviated form that does not require a judge to hear the case.

Lawyers, title companies, lenders and real estate professionals have scrambled to sort out a heap of properties left in limbo. Northwest Arkansas agents estimate roughly 200 foreclosed homes were recently pulled from the multiple listing service and continue to languish in limbo. Statewide, more than 500 homes nearing the end of the foreclosure process have dropped out of sight since July, according to RealtyTrac.

Joanie Stell, a broker with Coldwell Banker in Fayetteville, said after the court ruling homes that had made it to the end of the foreclosure pipeline in 2011 were pulled off the market by Fannie Mae, Freddie Mac and HUD — the U.S. Department of Housing and Urban Development.

“We are hearing it could take up to 14 months before some of those properties come back on the market for sale. Lenders are having to go back to square one and start the process over again if they are among those out-of-state banks who improperly used the non-judicial method,” Stell said.

RealtyTrac indicated it took lenders an average 333 days to complete the foreclosure process in Arkansas during  the back half of 2011.The process took 157 days in the first six months of the year.

Nationally, RealtyTrac estimates foreclosure filings were down about 34% in 2011, involving more than 1.88 million properties. Arkansas foreclosure filings were down about 12% from 2010, prior to the recent ruling.

Brandon Moore, CEO with RealtyTrac attributes the decline in filings to a lack of clarity regarding documentation and legal issues.

“We are continuing to see a highly dysfunctional foreclosure process that is inefficiently dealing with delinquent mortgages,” Moore noted in the release.

Joel Doelger, spokesman with Credit Counseling of Arkansas, said the recent foreclosure wrinkle could buy some distressed property owners more time to work out deal with lenders. The agency has seen a 45% drop in foreclosure counseling appointments since September.

Bertha Gutierrez, a statewide housing counselor with CCOA, has noticed fewer acceleration letters from out-of-state banks since October. She also said the ongoing confusion in protocol is allowing some homeowners to remain in their home while their case is under review.

FORECLOSURE FILINGS
• Northwest Arkansas (Properties in the foreclosure process)
Benton County
2011: 1,253
2010: 3,925

Washington County
2011: 890
2010: 3,059

• Fort Smith Region
Crawford County
2011: 10
2010: 105

Franklin County
2011: 3
2010: 17

Logan County
2011: 0
2010: 14

Sebastian County
2011: 18
2010: 248

Leflore County
2011: 90
2010: 163

Sequoyah County
2011: 79
2010: 27

MOST FILINGS PER HOUSEHOLDS (Top 5 Arkansas counties)
Benton County
2011: 1,253
2010: 3,925
1 filing per 69 households

Washington County
2011: 890
2010: 3,059
1 filing per 96 households

Pulaski County
2011: 1,786
2010: 3,657
1 filing per 99 households

Lonoke County
2011: 261
2010: 711
1 filing per 100 households

Saline County
2011: 392
2010: 910
1 filing per 105 households