LOS ANGELES – Sales of U.S. homes facing foreclosure are on the rise and are outpacing sales of bank-owned homes, a reflection of stepped- up efforts this year by lenders to avoid foreclosing on homes with mortgages gone unpaid.
In the third quarter, sales of homes already in the foreclosure process jumped 22 percent compared with the previous quarter and a year earlier, foreclosure tracker RealtyTrac Inc. said Thursday.
Short sales, when a lender agrees to accept less than what the homeowner owes on their mortgage, accounted for 65 percent of those so-called preforeclosure sales in the quarter, the firm said.
Banks have become more amenable to short sales as an alternative to foreclosure, which can often end up leading to bigger losses and mire lenders and borrowers in a time-consuming and expensive process. “More and more, they’re seeing that they’re going to lose less by approving a short sale than by dealing with the foreclosure process,” said Daren Blomquist, a vice president at RealtyTrac.
Attempts to fast-track the foreclosure process, particularly in states where courts must sign off on foreclosures, led to allegations last year that many banks and mortgage servicers processed foreclosures without verifying documents. Five of the biggest U.S. banks agreed in February to pay $25 billion to settle the claims as part of a deal with federal and state officials.
In the months since, the banks have increasingly used short sales as a way to provide mortgage relief to borrowers.
The lenders have reported that they provided $26 billion in home-loan relief between March 1 and Sept. 30, with about half of that stemming from short sales.