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updated: 6/15/2012 12:39 PM

Suburban foreclosures jump in May

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  • Lenders initiated foreclosure proceedings against more U.S. homeowners in May, setting the stage for increases in home repossessions and short sales -- scenarios that could further weigh down home values in coming months.

      Lenders initiated foreclosure proceedings against more U.S. homeowners in May, setting the stage for increases in home repossessions and short sales -- scenarios that could further weigh down home values in coming months.
    Associated Press

  • May foreclosures spike in area

    Graphic: May foreclosures spike in area

 
 

Foreclosure filings rose dramatically in May throughout the region -- especially for DuPage County, with a massive 159 percent hike -- compared to a year ago, according to data released Thursday by RealtyTrac Inc.

The Irvine, Calif.-based online research firm also showed foreclosures up about 54 percent in Illinois, placing the state at No. 5 nationwide for the most foreclosures. Illinois previously often rated No. 9 or 10 nationwide.

Other local counties also saw double-digit increases in May compared to May 2011, including Kane County at 92 percent; Kendall at 93 percent, Will at 87 percent. Lake at 72 percent and McHenry at 58 percent. Cook County, which includes Chicago and the suburbs, was at 45 percent.

The spikes could be attributed to the end of the controversy surrounding lenders, which are now getting back to business after a long investigation into robo-signing. That's when some lenders were accused of signing off on foreclosures without fully and properly reading documents, said Phil Ashton, associate professor of urban planning and policy and a specialist in the foreclosure crisis at the University of Illinois-Chicago.

"The national mortgage settlement has cleared the boards for banks so they can stop worrying about legal or political liability over how they treat distressed owners," said Ashton. "The blip is probably temporary and may not last more than a few months. But, as always, there's nothing really out there that I can see that is driving a better tomorrow for the housing market, so any future declines will have to be taken with a grain of salt."

The RealtyTrac figures focused on all filings, including default notices, scheduled auctions and bank repossessions. The firm monitors documents filed on properties with mortgages that have gone unpaid. Once that process begins, homes can end up being foreclosed, sold at auction or sold by short sale. A short sale is when the bank agrees to accept less than what the borrower owes on a mortgage.

The data for the Chicago region and Illinois was much different when compared to the nation. RealtyTrac said 205,990 U.S. properties were affected in May, an increase of 9 percent from April but down 4 percent from May 2011. The report also shows 1 in every 639 U.S. housing units had a foreclosure filing during the month.

Some 33 states saw annual increases in homes entering the foreclosure process last month, with New Jersey, Pennsylvania and Florida posting the biggest gains.

May was the first month since January 2010 that the number of homes starting on the foreclosure path rose on an annual basis. But the trend has been visible in the monthly numbers, with four out of the first five months of this year recording increases over the preceding month, according to the data.

Some 8.7 million U.S. homes entered the foreclosure process between January 2007 and last month, RealtyTrac said. Out of those, 4.3 million properties ended up foreclosed-upon.

The pace of home repossessions has been easing overall of late, with May being an exception.

Notably, states that have been foreclosure hotbeds throughout the housing downturn -- California, Nevada and Arizona -- each recorded sharp annual declines in home repossessions last month.

One factor: Banks are increasingly opting to resolve foreclosure cases via short sale, rather than completing the foreclosure process by taking back properties.

•Associated Press contributed to this report.

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