Month: April 2013

Golden State Foreclosure Starts Lowest Since Late 2005

April 23, 2013

The number of California homeowners entering the foreclosure process plunged to the lowest level in more than seven years last quarter. The unusually sharp drop in the number of mortgage default notices filed by lenders stems mainly from rising home values, a strengthening economy and government efforts to reduce foreclosures, a real estate information service reported.

During first-quarter 2013 lenders recorded 18,567 Notices of Default (NoDs) on California houses and condos. That was down 51.4 percent from 38,212 during the prior three months, and down 67.0 percent from 56,258 in first-quarter 2012, according to San Diego-based DataQuick.

Last quarter’s number was the lowest since 15,337 NoDs were recorded in fourth-quarter 2005. NoDs peaked in first-quarter 2009 at 135,431. DataQuick’s NoD statistics go back to 1992.

“Foreclosure starts were already trending much lower late last year because of rising home prices, a stronger labor market and the settlement agreement between the government and some lenders. But it appears last quarter’s drop was especially sharp because of a package of new state foreclosure laws – the ‘Homeowner Bill of Rights’ – that took effect January 1. Default notices fell off a cliff in January, then edged up. In recent years we’ve seen temporary lulls in foreclosure activity after new laws kick in and lenders adjust. It’s certainly possible foreclosure starts will pick up at some point this year if lenders need to play a lot of catch-up,” said John Walsh, DataQuick president.

“Rising home prices will be key to the final mop-up of the foreclosure mess,” he added. “As values rise, fewer people owe more than their homes are worth, and more people can refinance into a more favorable loan. It also means more who fall on hard times can sell their homes for enough to pay off the loan.”

The median price paid for a California home last quarter was $297,000, up 22.7 percent from a year ago, DataQuick reported.

NoD filings fell in all home price categories last quarter. But mortgage defaults remained more concentrated in California’s most affordable neighborhoods. Zip codes with first-quarter 2013 median sale prices below $200,000 collectively saw 2.9 NoDs filed for every 1,000 homes in those zip codes. The ratio was 1.9 NoDs per 1,000 homes for zip codes with $200,000 to $800,000 medians, while there were 0.7 NoDs filed per 1,000 homes for the group of zips with medians above $800,000.

Most of the loans going into default are still from the 2005-2007 period. The median origination quarter for defaulted loans is still third-quarter 2006. That has been the case for more than three years, indicating that weak underwriting standards peaked then.

On primary mortgages, California homeowners were a median 8.6 months behind on their payments when the lender filed the Notice of Default. The borrowers owed a median $14,380 on a median $310,000 mortgage.

On home equity loans and lines of credit in default, borrowers owed a median $4,971 on a median $68,099 credit line. The amount of the credit line that was actually in use cannot be determined from public records.

The most active “beneficiaries” in the formal foreclosure process last quarter were Wells Fargo (5,546), JP Morgan Chase (3,863) and Bank of America (2,565).

The trustees who pursued the highest number of defaults last quarter were Recontrust Co. (mainly for Bank of America and Bank of New York), Quality Loan Service Corp (Wells Fargo and others) and Trustee Corps (for Green Tree Servicing, JP Morgan Chase and others).

San Diego-based DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts. Notices of Default are recorded at county recorders offices and mark the first step of the formal foreclosure process.

Although 18,567 default notices were filed last quarter, they involved 18,010 homes because some borrowers were in default on multiple loans (e.g. a primary mortgage and a line of credit).

Among the state’s larger counties, loans were least likely to go into default last quarter in San Francisco, San Mateo, Santa Clara and Marin counties, based on an analysis of how many NoDs were filed for every 1,000 homes in existence. The probability was highest in Riverside, San Bernardino, Solano and San Joaquin counties. The analysis excluded counties with fewer than 50,000 homes.

Trustees Deeds recorded (TDs), or the finalized loss of a home to the formal foreclosure process, dropped to a six-year low last quarter. TDs totaled 13,591, down 35.7 percent from 21,127 foreclosures in the prior quarter, and down 55.1 percent from 30,261 foreclosures in first-quarter 2012. Last quarter’s foreclosure tally was the lowest for any quarter since first-quarter 2007, when 11,032 homes were foreclosed on. The all-time peak was 79,511 foreclosures in third-quarter 2008. The state’s all-time low was 637 in second-quarter 2005, DataQuick reported.

Just as with mortgage default filings, foreclosures remained far more concentrated in the state’s most affordable communities. Zip codes with first-quarter 2013 median sale prices below $200,000 collectively saw 2.9 homes foreclosed on for every 1,000 homes in existence. That compares with 1.2 foreclosures per 1,000 homes for zips with medians from $200,000 to $800,000, and 0.3 foreclosures per 1,000 homes in the group of zips with medians over $800,000.

On average, homes foreclosed on last quarter took 8.1 months to wind their way through the formal foreclosure process, beginning with an NoD. That’s down from an average of 8.9 months the prior quarter and down from 8.5 months a year earlier.

At formal foreclosure auctions held statewide last quarter, an estimated 47.6 percent of the foreclosed properties were bought by investors or others that don’t appear to be lender or government entities. That was up from an estimated 41.7 percent the previous quarter and up from 33.7 percent a year earlier, DataQuick reported.

Foreclosure resales – properties foreclosed on in the prior 12 months – accounted for 17.3 percent of all California resale activity last quarter. That was up slightly from 16.6 percent the prior quarter and down from 33.6 percent a year ago. Foreclosure resales peaked at 57.8 percent in first-quarter 2009. Among the state’s larger counties last quarter, foreclosure resales varied from 6.9 percent in San Francisco County to 29.9 percent in Tulare County.

Lenders’ shift toward short sales as a foreclosure alternative has helped lower foreclosure activity in recent years. Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 20.2 percent of the state’s resale market last quarter. That was down from an estimated 24.2 percent the prior quarter and 24.8 percent a year earlier. However, the estimated number (rather than percentage) of short sales last quarter dipped just 1.5 percent from first-quarter 2012.

Monday Morning Cup of Coffee: Subprime lending is back

By Kerri Ann Panchuk

• April 29, 2013 •

Monday Morning Cup of Coffee is a quick look at the news coming across the HousingWire weekend desk, with more coverage to come on bigger issues.

The Federal Reserve and the Office of the Comptroller of Currency halted the independent national foreclosure review in January, hoping to end a complex and costly process in exchange for a one-time $9.3 billion settlement between mortgage servicers and potential victims of wrongful foreclosures.

But the deal, which includes $3.6 billion in payouts to harmed homeowners, remains controversial despite efforts to soften the blow. News agencies – like UT San Diego – say homeowners remain mostly unsatisfied with settlement payouts as low as a few hundred dollars. Not only are U.S. lawmakers looking into the settlement, the Government Accountability Office continues to review aspects of the deal.

Subprime is back and this time borrowers and lenders know exactly what they’re getting into, the Los Angeles Times claims in a new report.

Apparently, some Americans with shoddy credit scores and past foreclosures want in on today’s rising real estate prices and they’re ready and willing to buy homes now. The LA Times notes in a new article that despite this being the era of “tightfisted banking,” at least one couple interviewed managed to get a subprime loan with a 10% interest rate after going through a foreclosure and the bankruptcy of a business.

Of course to get the loan, the homeowners had to put down a 35% downpayment. But with the right amount of money up front, the article says lenders are going subprime again. To protect themselves, lenders are looking more deeply at collateral, downpayments and the borrowers’ ability to repay the debt. Lenders also are holding loans on their own books in the hopes that a private secondary market will eventually be there to buy them in the future. Click here to read more.

The next foreclosure crisis is coming, but this time it’s not home mortgages in trouble. Instead, the Wall Street Journal suggests commercial mortgages are about to reach a reevaluation period in which lenders either demand full payment or decide to extend the life of the loan.

The only problem is small businesses depleted their reserves during the recession, making them riskier long-term bets for lenders. The end result could be businesses either having to find a new lender or eventually facing a foreclosure, the business publication suggests.

Banking regulators closed two banks this past week. The Georgia Department of Finance shut down Douglas County Bankin Douglasville, Ga., appointing the Federal Deposit Insurance Corp. as receiver. The FDIC entered into an agreement for Hamilton State Bank in Hoschton, Ga., to assume all of the bank’s deposits.

The four branches of Douglas county bank will now operate as branches of Hamilton State Bank. Last December, Douglas County Bank had $316.5 million in total assets and $314.3 million in total deposits. The FDIC estimates the closing will cost the Deposit Insurance Fund $86.4 million.

Parkway Bank in Lenoir, N.C., also was shut down by North Carolina banking regulators and the FDIC. CertrusBank assumed all of the deposits. The total cost to the DIP fund came in around $18 million.

Equity credit lines and second mortgages are making a comeback

Banks increasingly are willing to let owners tap their home’s equity. But unlike the bubble years, lenders are demanding excellent credit for the best rates.

By Kenneth R. HarneyApril 19, 2013

LA Times

WASHINGTON — Using your home as an ATM no longer is a financial option, but the tools that allowed owners to pull out massive amounts of money during the boom years — equity credit lines and second mortgages — are making a comeback.

Banking and credit analysts say the dollar volumes of new originations of home equity loans are rising again, significantly so in areas of the country that are experiencing post-recession rebounds in property values. These include California, Arizona, New Mexico, most of the Atlantic coastal states, the Pacific Northwest, Texas and parts of the Midwest.

Not only have owners’ equity positions grown substantially on a national basis since 2011 — up an estimated $1.7 trillion during the last 18 months, according to the Federal Reserve — but banks increasingly are willing to allow owners to tap that equity. Unlike during the credit bubble years of 2003-06, however, they aren’t permitting owners to go whole hog: mortgaging their homes up to 100% of market value with first, second and even third loans or credit lines.

 Now major lenders are restricting the combined total of first and second loans against a house to no more than 85% of value. For instance, if your house is worth $500,000 and the balance on your first mortgage is $375,000, you’d probably be limited to a second mortgage or credit line of $50,000.

Contrast this with 2007, the high-point year of home-equity lending, when many lenders offered “piggyback” financing packages that allowed 100% debt without private mortgage insurance. A buyer of a $500,000 house could get a $400,000 first mortgage and a second loan of $100,000.

That ultimately didn’t work well for the banks. During the third quarter of 2012 alone, according to federal estimates, banks wrote off $4.5 billion in defaulted equity loans, often in situations in which homeowners found themselves underwater and behind on both first and second loans.

In such a situation, second mortgages become essentially worthless to the bank since in a foreclosure, the holder of the first mortgage gets paid off first. On underwater foreclosures, the second loan holder is left holding the bag.

Lenders this spring are also much pickier on credit quality than they were as little as six years ago. If you’ve got a delinquency-pocked credit history and you want to pull out a substantial amount of equity using a credit line, don’t count on getting anywhere near the best rate quotes or terms available.

To illustrate, say you own a house in Los Angeles worth $600,000 with a $400,000 first mortgage balance, and you want a $100,000 equity credit line.

Wells Fargo’s online equity loan calculator quoted a floating-rate “home equity account” for 10 years at 4.75% in mid-April for borrowers with “excellent” credit. The site defines excellent as essentially meaning no missed payments, no delinquencies on your credit report, spiffy clean.

For a borrower with “average” credit seeking the same $100,000 credit line, by contrast, the rate jumps to 7.5%. The term “average” means you’ve got a credit history with delinquencies and perhaps other problems.

Matt Potere, Bank of America‘s home equity product executive, said that his institution has no specific cutoffs for FICO credit scores, preferring instead to look at multiple factors simultaneously — combined loan to value, full credit history of the applicant and the location of the property.

Location factors into pricing, Potere said, because some markets have historical patterns of high volatility — prices spiral upward for a while, then plummet. This raises the potential costs to the bank if a borrower goes delinquent during a period when values are in decline.

Some jurisdictions also have special add-on costs that factor into quotes, such as mortgage taxes, and these can raise pricing quotes slightly.

Despite the multibillion-dollar losses that Bank of America and other large lenders have racked up on their equity loan portfolios from the bust and recession period, executives such as Potere are convinced that this time around, things will be different thanks to smarter underwriting.

Bottom line: If you’ve got equity in your house, have a need for cash in a lump sum or credit line and can get through the underwriting hoops and snares set by loss-leery lenders, go for it. Rates are low and the bank windows are opening again.

Just not as wide as they once did.

Fee-laden FHA mortgages cost more than privately insured loans

By Lew SichelmanApril 19, 2013

LA Times

The lending landscape shifted measurably this month when the standard-bearer for first-time buyers and low-to-moderate income borrowers became more expensive than its private business counterpart.

On April 1, fees for low-down-payment mortgages insured by the Federal Housing Administrationrose for the third time in two years. The hike in fees serves a twofold purpose: to help shore up the FHA’s sagging mortgage insurance fund, which is dangerously low; and to reduce the government’s footprint in the mortgage market.

Only time will tell whether the first objective will be reached. But the second goal — allowing private mortgage insurance companies to gain a larger market share — probably will be met because PMI is now the less expensive alternative.

How much less expensive? Over a five-year period, borrowers with a 760 FICO score who make a 5% down payment on a 30-year, $170,000 mortgage could save more than $4,000 by opting for a loan insured by Genworth Financial, one of six private mortgage insurers.

Of course, most folks don’t have credit scores that high. But for nearly all borrowers who can come up with a down payment of at least 3.5% on a loan of up to $625,000, PMI is now probably the better deal.

The FHA has always been the first choice of borrowers with low down payments who couldn’t meet the private sector’s more rigid underwriting standards. And during the housing debacle, the agency picked up the slack as private insurers backed out of the market. A couple of companies even went out of business altogether.

But the FHA paid dearly for its efforts in supporting the market. Foreclosures are up significantly, and the health of the insurance fund from which claims are paid is at or below the level required by Congress.

So, as of April 1, the agency raised its annual premium by 0.05 percentage point to 0.1%, depending on the loan amount and the all-important loan-to-value ratio. That’s on top of an earlier 0.1 percentage point increase in the annual fee instituted last April, as well as the hike in the upfront mortgage insurance premium, to 1.75% of the loan amount from 1%.

As a result, the choice between mortgages with private mortgage insurance and those insured by Uncle Sam has never been clearer.

Lenders require insurance, either private or government-based, on mortgages in which there is a down payment of less than 20%. Such loans are considered more likely to default than those in which borrowers have more of their own money on the line.

Here’s how a 30-year, $170,000 FHA-insured loan with 5% down compares with one insured by Genworth.

The interest rate on the FHA loan is 4%, but because of secondary market fees charged on conventional loans, the rate on the Genworth-backed loan is 4.375%. Even though the privately insured mortgage carries a higher rate, it is still cheaper because the FHA’s insurance fees are higher.

First, there’s the 1.75% upfront mortgage insurance premium. In this case, that amounts to $2,975, bringing the total loan amount to $172,975. Then there’s the 1.3% monthly premium, which adds $184.17 to the monthly mortgage payment, bringing your total monthly payout to $1,009.98.

Genworth, on the other hand, isn’t charging an upfront premium, so the loan amount remains at $170,000. Moreover, its monthly premium is just 0.59%, or $83.58. So the total monthly payment is $932.37, a difference of $77.61 a month. Over a five-year period, the savings is $4,656.60.

Now look at the same loan with 10% down.

Again, the coupon rate is somewhat higher on the Genworth-insured loan because of the secondary market charges. But the company wants no upfront fee, whereas Uncle Sam wants 1.75% at closing. Thus, just as with the 5% down scenario, you are borrowing $172,975 with an FHA-insured loan versus $170,000 otherwise.

The other big difference is the monthly mortgage insurance premium: the FHA’s 1.3%, or $184.17, versus Genworth’s 0.44%, or $62.33.

In total, then, the monthly payment would be $1,009.98 on the government mortgage as opposed to $911.12 for the privately insured loan. Over a five-year period, the savings on this 10% down mortgage is $5,931.60.

Another advantage a privately insured loan has over one backed by the government is that PMI can be canceled. And in a market in which housing values are rising, this is an extra added benefit on top of lower monthly costs.

Currently, the FHA will allow borrowers to cancel coverage once their loan-to-value ratio reaches 78% of the original loan balance. But starting June 3, the government will require borrowers to pay the premium as long as the loan is in force. In other words, the only way the insurance can be ended is by refinancing or otherwise paying off the loan.

On the other hand, PMI can be canceled at the borrower’s request when his equity reaches 20% — as long as he is current on his payments and the value is backed by a new appraisal. Termination is automatic when the loan amortizes to a 78% loan-to-value ratio — again, as long as you are current.

Southland Median Home Sale Price Climbs Again; Sales Rise Slightly Yr/Yr

April 17, 2013

The median price paid for a Southern California home hit a 56-month high in March, rising 23.4 percent from a year earlier as the impact of foreclosures continued to fade and sales of mid- to high-end homes shot up. Total sales were the highest in six years for a March despite a sharp drop in sub-$300,000 deals, a real estate information service reported.

A total of 20,581 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was up 29.1 percent from 15,945 sales in February, and up 3.1 percent from 19,953 sales in March 2012, according to San Diego-based DataQuick.

Sales normally jump between February and March, with that month-to-month gain averaging 36.4 percent since 1988, when DataQuick’s statistics begin.

Last month’s sales were the highest for the month of March since 21,856 Southland homes sold in March 2007, but they were still 15.1 percent below the March average of 24,254 sales. The low for March sales was 12,808 in 2008, while the high was 37,030 in March 2004.

The median price paid for all new and resale houses and condos sold in the six-county Southland was $345,500 last month, up 8.0 percent from $320,000 in February and up 23.4 percent from $280,000 in March 2012. Last month’s median was the highest since July 2008, when it was $348,000.

The median has risen on a year-over-year basis for 12 consecutive months, and those gains have been double-digit – between 10.8 percent and 23.5 percent – since last August.

“It’s remarkable how much the housing scene has changed in a year. At this point in 2012 there were still plenty of folks sitting on the market’s sidelines, waiting to be sure the recovery was real. But gradually the psychology shifted as the economy picked up steam and mortgage rates fell to historic lows. We’re seeing the release of a lot of pent-up demand, especially in the middle and higher-priced neighborhoods where activity had been sluggish for years,” said John Walsh, DataQuick president.

“Price measures continue to rise for two simple reasons,” Walsh added. “First, demand for homes has risen at a time when the available supply is unusually low. Prices have had nowhere to go but up in many areas. Second, the gains are especially high right now because of the change in market mix: Sales of lower-cost homes have fallen at the same time activity in the higher price ranges has risen.”

It appears that better than half of last month’s 23.4 percent year-over-year gain in the Southland median sale price reflects rising home prices, with the balance reflecting the change in market mix.

Some of the biggest price gains have come in the lower end of the market, which was hit hardest by foreclosures and price declines during the downturn. In March, the lowest-cost third of Southern California’s housing stock saw a 24.6 percent year-over-year increase in the median price paid per square foot for resale houses. The gain from a year earlier was 17.1 percent for the middle third of the market and 14.3 percent for the top third.

Sales continued to surge in move-up markets last month. The number of homes sold in March for between $300,000 and $800,000 – a range that would include many move-up buyers – rose 29.5 percent year-over-year. The number of homes sold for $500,000 or more jumped 40.2 percent from one year earlier, while sales of $800,000-plus homes increased 33.4 percent year-over-year.

Last month, 27.2 percent of all Southland home sales were for $500,000 or more, compared with a revised 24.4 percent in February and 19.6 percent a year earlier.

Sales continued to fall on a year-over-year basis in many lower-cost communities. The number of homes that sold below $200,000 last month declined 33.3 percent year-over-year, while sales below $300,000 dipped 24.5 percent. Sales in many affordable markets have been limited not by a lack of demand, but by a lack of supply. The latter has two main causes: First, a relatively high percentage of owners can’t afford to put their homes up for sell because they owe more than the homes are worth. Second, foreclosures are way down.

Last month foreclosure resales – homes foreclosed on in the prior 12 months – accounted for 13.9 percent of the Southland resale market. That was down from 16.2 percent the month before and down from 31.5 percent a year earlier. Last month’s figure was the lowest since it was 13.6 percent in September 2007. In the current cycle, foreclosure resales hit a high of 56.7 percent in February 2009.

Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 21.5 percent of Southland resales last month. That was down from an estimated 22.3 percent the month before and 24.6 percent a year earlier.

The share of investor and cash buying remained near all-time highs.

Absentee buyers – mostly investors and some second-home purchasers – bought 30.6 percent of the Southland homes sold last month. That was down from 32.3 percent in February and up from 28.2 percent a year earlier. The record was 32.4 percent in January, while the monthly average since 2000, when the absentee data begin, is 18.0 percent. Last month’s absentee buyers paid a median $274,000, up 29.2 percent from a year earlier.

The share of homes flipped has trended higher in recent months, though it edged lower last month. In March, 6.1 percent of all Southland homes sold on the open market had previously sold in the prior six months, down from a flipping rate of 6.7 percent in February and up from 4.0 percent a year ago. (The figures exclude homes that were resold after being purchased at public foreclosure auction sales on the courthouse steps.)

Buyers paying with cash accounted for 34.1 percent of last month’s home sales, compared with a record 36.9 percent the month before and 32.4 percent a year earlier. Since 1988 the monthly average is 16.0 percent. Cash buyers paid a median $280,750 last month, up 30.6 percent from a year ago.

Credit conditions have shown signs of modest improvement.

Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 23.8 percent of last month’s Southland purchase lending – the highest since September 2007, when jumbos made up 26.9 percent of the market. Last month’s figure was up from 21.1 percent the prior month and 16.4 percent a year earlier. In the months leading up to the credit crunch that struck in August 2007, jumbos accounted for around 40 percent of the home loan market.

With fixed rates on 30-year loans so low, and aversion to risk in the marketplace high, the use of adjustable-rate mortgages (ARMs) remains very low in an historical context. Last month 7.4 percent of Southland home purchase loans were ARMs, up from 5.6 percent the prior month and up from 6.2 percent a year earlier. Last month’s figure was the highest since ARMs were 8.5 percent of the purchase loan market in August 2011. Since 2000, a monthly average of about 33 percent of Southland purchase have been ARMs.

The most active lenders to Southern California home buyers last month were Wells Fargo with 8.2 percent of the purchase loan market, with 2.8 percent, and both Prospect Mortgage and Bank of America with 2.4 percent.

Government-insured FHA loans, a popular low-down-payment choice among first-time buyers, accounted for 22.9 percent of all purchase mortgages last month. That was down from 24.6 percent the month before and 30.0 percent a year earlier. In recent months the FHA share has been the lowest since summer 2008. The decline reflects tighter FHA qualifying standards implemented in recent years as well as the difficulties first-time buyers are having competing with investors.

DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.

The typical monthly mortgage payment Southland buyers committed themselves to paying last month was $1,252, up from $1,154 the month before and up from $1,063 a year earlier. Adjusted for inflation, last month’s typical payment was 47.8 percent below the typical payment in the spring of 1989, the peak of the prior real estate cycle. It was 57.3 percent below the current cycle’s peak in July 2007.

Indicators of market distress continue to move in different directions. Foreclosure activity remains well below year-ago and far below peak levels. Financing with multiple mortgages is very low, and down payment sizes are stable, DataQuick reported.

Freddie Mac offers free online tutorial for borrowers


Freddie Mac announced Monday its new free, online tutorial called CreditSmart, that will provide working families and new or inexperienced borrowers with the basic information they need to buy their home.

CreditSmart will include information on building savings, personal credit and making wise financial decisions. The online tutorial is a comprehensive, multilingual financial educational curriculum, reaching more than 3 million consumers in 33 states.

Christina Diaz Malone, Freddie Mac’s vice president of corporate relations and housing outreach, said, “Our new online CreditSmart tutorial is a stepping stone to homeownership, especially for working families who are unsure how to start household budgets or build the personal savings and strong credit for the future.”

She added, “Today’s announcement underscores Freddie Mac’s commitment to help America’s next generation of borrowers achieve long-term financial stability.”

For future borrowers, the online tutorial includes advice on topics such as banking, budgeting and credit.

For current homeowners, it is tailored to helping them avoid foreclosure, maintaining their home and succeeding as homeowners.

Foreclosures returning to pre-housing bust levels

By Les Christie @CNNMoney April 11, 2013


The number of homes lost to foreclosure is closing in on levels not seen since before the housing meltdown.

Foreclosure filings — including notices of default, scheduled auctions and bank repossessions — during the first quarter fell 23% from a year earlier, the lowest level since the second quarter of 2007.

Last month, banks repossessed just under 44,000 homes. In September 2010, repossessions topped 100,000 a month.

“We’re getting back to normal and will be there by next year,” said Daren Blomquist, vice president at RealtyTrac.

For the past couple of years, foreclosures have been on the decline as homeowners seek alternatives like short sales, in which they sell their home for less than what they owe and the bank agrees to forgive the difference.

The deals are preferred by the banks over foreclosures and have less of a negative impact on a consumer’s credit score. But now even the need to turn to short sales is waning.

Government initiatives, like the Home Affordable Modification Program and Home Affordable Refinance Program, have helped millions of borrowers avoid foreclosure. And last spring, under a $25 billion settlement deal with state and federal officials, the nation’s largest mortgage lenders agreed to help struggling borrowers by lowering their mortgage rates, reducing their principal and other fixes.

Now, the landscape of foreclosures is starting to look a lot like it did in the pre-bust years, said Blomquist.

A larger percentage of the nation’s foreclosure activity is occurring in areas suffering from severe economic problems, such as “Rust Belt” cities like Rockford, Ill. and Chicago, not in the recently-developed, mid-to-upper class neighborhoods of California, Florida and Arizona that were hit hardest when the housing bubble burst, he said.

And many of the people who lose their homes now are dealing with a layoff or personal issue, such as a divorce, illness or death in the family, said Blomquist. During the housing bust, people were forced to default because of plunging home prices and unaffordable mortgage terms.

There are some states that are still struggling with a backlog of foreclosures like Florida, Illinois and Georgia, all states where courts oversee the foreclosure process. Florida had more than twice as many bank repossessions as any other state in March — nearly 7,600. Illinois, with more than 3,500, was second and Georgia, with 3,350, was third.

With prices expected to continue to rise — they were up more than 8% year-over-year in January — the number of short sales should continue to fall, and so should foreclosures, according to Blomquist.