Experts: Beware a slow cascade of additional foreclosures in 2012

If the numbers were the only barometer, it would appear that the U.S. foreclosure crisis had eased considerably in 2011. But taken alone, those statistics don't tell the whole story of the pressures on homeowners and how they are affecting the nation's housing market.

Over the last 12 months, the foreclosure rate and the number of filings nationwide reached their lowest point since the current spiral intensified in 2007, RealtyTrac Inc. reported last week.

As 2011 began, RealtyTrac, of Irvine, Calif., which tracks foreclosure activity, was predicting there would be a 20 percent increase over 2010 in the number of houses repossessed by lenders after foreclosure. Instead, that number declined, to 804,423 last year from 1.2 million. Figures for 2011 also show a 34 percent decline from 2010 in the number of properties at some point in the foreclosure process.

The numbers are deceiving, however. Brandon Moore, RealtyTrac's chief executive officer, attributed the hefty decline primarily to the effects of the 2010 controversy over "robo-signing," in which a number of loan servicers were accused of signing thousands of foreclosure documents without reading them.

Delays due to state action and self-imposed moratoriums by lenders created a backlog in processing that did not begin easing until the second half of 2011.

The result, Moore said, is that "we are continuing to see a highly dysfunctional foreclosure process that is inefficiently dealing with delinquent mortgages - particularly in states with a judicial foreclosure process," such as New Jersey, Pennsylvania, and Florida, where robo-signing was equated with fraud by some officials.

What the legal wrangling and the millions of filings since the housing bubble burst have combined to accomplish is a lengthening of the timeline for processing foreclosures in most states, RealtyTrac reported.

Most states' foreclosure-processing systems were not equipped to handle the volume seen in the last five years.

RealtyTrac calculated that in a typical year - it chose 2005 - paperwork for 500,000 foreclosures would be filed nationally. In 2010, there were 2.9 million foreclosures. An additional 1.9 million households received filings in 2011 - fewer, but still almost four times more than what had been considered normal.