UPDATE: As Daily Finance notes, foreclosures hit a record monthly total of 102,134 in September, a three percent rise over the previous month.
LOS ANGELES (AP, Alex Veiga) -- Lenders seized more U.S. homes this summer than in any three-month stretch since the housing market began to bust in 2006. But many of the foreclosures may be challenged in court later because of allegations that banks evicted people without reading the documents.
A total of 288,345 properties were lost to foreclosure in the July-September quarter, according to data released Thursday by RealtyTrac Inc., a foreclosure listing service. That's up from nearly 270,000 in the second quarter, the previous high point in the firm's records dating back to 2005.
Banks have seized more than 816,000 homes through the first nine months of the year and had been on pace to seize 1.2 million by the end of 2010. But fewer are expected now that several major lenders have suspended foreclosures and sales of repossessed homes until they can sort out the foreclosure-documents mess.
On Wednesday, officials in 50 states and the District of Columbia launched a joint investigation into the matter.
Rick Sharga, a senior vice president at RealtyTrac, noted that legal challenges are likely. But he doubts many will be successful in overturning foreclosures. He said he expects foreclosures to resume and predicts about 1 million homes will be taken back this year.
"The bottom line is not that those properties won't be repossessed," Sharga said. "They simply won't be repossessed as quickly. We're simply delaying the inevitable."
Experts say if lenders resume foreclosures in a couple of months or so, the delay will amount to a temporary lull followed by a spike in home repossessions early next year.
But if the crisis drags on for months and more lenders stop seizing homes, the foreclosure delays could last well into next year. That could have a severe effect on home sales and prices.
A freeze in foreclosure sales between now and December by a majority of lenders could amount to removing 30 percent of all home sales for that period, Sharga suggests.
"You would virtually guarantee that tens of thousands of properties would miss going to market in time for the spring, which is the peak buying season for real estate," Sharga said.
Nearly 600,000 bank-owned homes are not yet on the market, according to RealtyTrac.
The states most affected by the foreclosure freeze accounted for 40 percent of all foreclosure activity in the third quarter and 36 percent of homes taken back by lenders, the firm estimates. Sales of homes by lenders made up 18 percent of all U.S. home sales in September, the firm said.
Other experts say delays from the foreclosure documents problem won't end up having a huge impact on home sales or housing values.
Foreclosed homes that would have been sold by lenders now will be sold seven or eight months from now, and prices will start going declining about 3 percent to 4 percent nationally, on average, when those sales take place, said Andres Carbacho-Burgos, an economist at Moody's Economy.com.
That's good news if you're a homeowner looking to sell in the near term, because there won't be as much competition from deeply discounted foreclosed properties, Carbacho-Burgos said.
"But if you were looking to sell further down the line, that's not so good news," he said.
Economic woes, such as unemployment or reduced income, continue to be the main catalysts for foreclosures this year.
While bank repossessions rose in the third quarter, new defaults continued to decline.
Some 269,647 properties received default notices, the first step in the foreclosure process, down 1 percent from the second quarter and down 21 percent from the same period last year, according to RealtyTrac, which tracks notices for defaults, scheduled home auctions and home repossessions.
In all, 930,437 homeowners received a foreclosure-related warning between July and September, up nearly 4 percent from the second quarter but down 1 percent from the same period last year, RealtyTrac said. The latest tally translates to one in 139 U.S. homes.
AP Real Estate Writer Alan Zibel contributed from Washington to this report.