Courtesy RealtyTrac

Even homeowners delinquent on their payments got a bit of a holiday in December as foreclosure activity slowed to the lowest rate seen in 49 months, according to data released today by RealtyTrac. With a total of 205,024 filings reported for the month, activity was down 9% from November and down 20% year-over-year.

The largest drop seen was in default notices, which decreased 19% for the month and were down 23% annually. Scheduled foreclosures auctions were also down on a monthly and yearly basis, dropping 12% and 24%, respectively. And bank repossessions (REOs) were up 10% from November but remained 12% lower on an annual basis.

Part of the slowdown can be attributed to programs put in place by Fannie Mae, Freddie Mac, and several large mortgage lenders that halted evictions during the holidays. However, that doesn’t account for all of the drop-off, says Daren Blomquist, a spokesperson at RealtyTrac. "December is a little bit of a mystery to us because we saw some big decreases in California and Arizona … which both saw pretty dramatic decreases in filings, after we had started to see those numbers ramping up in the last few months," he said on a call with Builder yesterday. "At this point I’m chalking it up to more of a seasonal issue. Our expectation is that December is the calm before another surge of foreclosures early this year."

The month’s low numbers helped bring both 2011’s foreclosure activity and foreclosure rate to the lowest levels seen since 2007. As of year’s end, a total of 2,698,967 filings were reported—including default notices, scheduled auctions, and REOs—a 34% drop from 2010.

"Foreclosures were in full delay mode in 2011, resulting in a dramatic drop in foreclosure activity for the year," said Brandon Moore, RealtyTrac’s CEO, in a press statement. "The lack of clarity regarding many of the documentation and legal issues plaguing the foreclosure industry means 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."

Indeed, the average processing time to complete the foreclosure process was 348 days in the fourth quarter of the year, up from 305 days in the fourth quarter of 2010. In New York, the average foreclosure time by the last quarter of 2011 had reached 1,019 days, longer than any other state.

As for foreclosure rates by state, Nevada ranked highest for the fifth consecutive year, with a rate of more than 6% of homes in the state, or one in 16, receiving at least one filing during 2011. Arizona came in at No. 2 for the third year in a row, with 4.14% of its housing units, one in 14, receiving a filing during the year. California, at a rate of 3.19% of homes or one in every 31 receiving a filing, came in third.

Other states rounding out the top 10 were Georgia (2.71%), Utah (2.32%), Michigan (2.21%), Florida (2.06%), Illinois (1.95%), Colorado (1.78%), and Idaho (1.77%).

Among metro areas with a population of 200,000 or more, Las Vegas posted the nation’s top foreclosure rate last year with one in every 14 Las Vegas homes receiving a filing during 2011. Of the remaining top 20 metros with the highest foreclosure rates, California claimed 10, including Stockton (No. 2), Modesto (No. 3), Vallejo-Fairfield (No. 4), Riverside-San Bernardino (No. 5), Merced (No. 7), Bakersfield (No. 9), Sacramento (No. 10), Fresno (No. 11), Visalia (No. 13), and Ventura (No. 16). Other cities in the top 20 included Phoenix (No. 6); Reno, Nev. (No. 8); Atlanta (No. 12); Prescott, Ariz. (No.14); Cape Coral-Fort Myers, Fla. (No. 15); Freeley, Colo. (No. 17); Detroit (No. 18); Boise, Idaho (No. 19); and Salt Lake City (No. 20).

As for 2012, "it’s going to be continuing what we’ve seen in the second half of 2011," Blomquist says, adding that zigzagging levels will continue and conditions will vary greatly by region. "The pattern we’re seeing is that lenders are pushing batches through at different times based on what they think they have documentation to support, and based on the local market conditions."

RealtyTrac expects to see higher numbers of foreclosures in 2012 than the nation saw last year, although rates aren’t expected to return to 2010 levels. Based on foreclosure starts, Blomquist says, RealtyTrac is estimating one million REOs will be reported this year, up from 800,000 nationwide in 2011. But estimating how many new foreclosures are coming gets tricky, he says. "Some of the big wildcards as to how much earlier stages of foreclosures will increase are the economy and how confident homeowners are feeling, especially underwater homeowners, who might be considering walking away. They’ll be more likely to stick it out if they see more signs of improvement in the economy and the housing market in 2012."

Claire Easley is a senior editor at Builder.

Learn more about markets featured in this article: Las Vegas, NV, Stockton, CA, Modesto, CA, Vallejo, CA, Riverside, CA, Merced, CA, Bakersfield, CA, Fresno, CA, Phoenix, AZ, Reno, NV, Atlanta, GA, Prescott, AZ, Cape Coral, FL, Detroit, MI, Boise City, ID, Salt Lake City, UT, Greenville, SC.