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Foreclosure filings spike in region, Pa.

| Thursday, April 12, 2012, 4:45 p.m.

Home foreclosure activity in the Pittsburgh region and across the state has jumped this year because of a spike in mortgage defaults, according to an industry report released today

Lenders issued 1,036 default notices -- starting the foreclosure process -- to homeowners in the seven-county region in the January-March quarter, said RealtyTrac Inc., a housing market research firm in Irvine, Calif. The filings were almost triple the 370 notices sent to homeowners in the October-December period, and more than double the 410 in the January-March period of 2011.

The spike in foreclosure actions began when attorneys general in every state but Oklahoma reached a $25 billion settlement in February over allegations that the nation's five largest mortgage lenders had illegally foreclosed on some homeowners.

The agreement ended legal action against Bank of America, Citigroup, Wells Fargo, JPMorgan Chase and Ally Financial claiming the lenders signed foreclosure documents without making sure the information was correct, a process known as "robo-signing." When states began pursuing the allegations two years ago, many banks suspended foreclosure activity, experts said.

"Banks were not doing as many foreclosures because they had been found to be doing them improperly," said Dan Sullivan, a foreclosure prevention specialist at Action-Housing Inc., Downtown. "But once the settlement was behind them, banks opened up the floodgates and filed all these (default) notices," he said.

In Pennsylvania, the number of default notices last quarter jumped to 5,839. That was 55 percent more than the 3,758 in the October-December quarter, and 75 percent higher than the 3,346 in first-quarter 2011.

Higher foreclosure activity in Pennsylvania contrasted with the trend nationwide. Total U.S. foreclosure activity so far this year, including bank repossessions and sheriff's sales, fell to the lowest level since the fourth quarter of 2007, RealtyTrac said.

The 572,928 filings nationwide last quarter were 2 percent lower than the fourth quarter, and 16 percent below first-quarter 2011.

The reason for the diverging trends lies in how foreclosures are done. Twenty-four states do not require judicial reviews of foreclosure actions and were less affected by the robosigning controversy. But the 26 other states, including Pennsylvania, require that local judges rule on foreclosure actions, and robo-signing claims in those states substantially slowed foreclosure filings, said RealtyTrac Vice President Darren Bloomquist.

"We saw a more severe drop-off in foreclosure activity in those (26) states," Bloomquist said. "Now, we're seeing a corresponding bigger spike off those lows."

Sullivan said the more recent spike in default notices in the Pittsburgh region means a jump in sheriff's sales is likely later this year.

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