South Florida’s foreclosure debacle led the nation in the third quarter, with 58,624 homes in some stage of default, RealtyTrac Inc. said Thursday.
The number of filings in Palm Beach, Broward and Miami-Dade counties rose 25 percent from the second quarter and 9 percent from the third quarter of last year.
The Los Angeles metro area was second in the U.S. with 48,849 filings, and Chicago was third with 44,732.
Meanwhile, the South Florida counties had the seventh-highest foreclosure rate in the July-through-September period, with one in every 41 homes receiving a filing. Nationwide, one in every 139 homes is in the foreclosure process.
Cape Coral-Fort Myers was the only other Florida metro area in the top 10, posting the second-highest foreclosure rate in the country.
Lawyers and analysts expect mortgage defaults to increase once big lenders lift foreclosure freezes that began in the past month over concerns about paperwork errors.
The main causes of foreclosures are high unemployment, exotic loans made during the housing boom and falling property values that mean borrowers now owe more than their homes are worth.
Many homeowners who are “upside down” or “underwater” on their mortgages are choosing to abandon the properties because they have no hope of earning back their equity in the next few years.
“For homeowners who are upside down, relief is not going to come soon enough,” said Mike Larson, a housing analyst with Weiss Research in Jupiter.
RealtyTrac, an Irvine, Calif.-based research firm, measures the nation’s 206 largest metro areas. It records three types of filings: default notices, scheduled foreclosure auctions and bank repossessions.
Nearly a quarter of the filings in South Florida from July through September were scheduled auctions in Palm Beach County. Lawyers say the county is serious about moving cases through the court system and setting dates for the homes to be repossessed by lenders.
Palm Beach, Broward and Miami-Dade counties also led the nation in foreclosure activity during the first half of 2010, with 94,466 homes getting a notice, RealtyTrac said.
The foreclosure crisis is likely to continue until job growth improves, analysts say.
To address the avalanche of defaults, lenders must do a better job of approving loan modifications and short sales, said Jerry Tepps, a foreclosure defense attorney in Plantation.
An even better solution: Reduce loan balances, something banks have been reluctant to do, Tepps said.
“If the banks want to get this sorted out and get people back on track, they need to be much more aggressive in negotiating with homeowners,” he said.
But the reality is, the federal government doesn’t want lenders reducing mortgage balances or approving loan modifications in massive numbers, said Anthony Sanders, a professor of real estate finance at George Mason University.
“If the banks granted all the loan modifications and principal (mortgage) write-downs that we would like, the banks would cease to exist,” Sanders said. “Sad but true.”