Foreclosures have slowed over the past year. Of course, they remain elevated on a historical basis. Last fall, they plummeted when banks were found to have used faulty procedures. Since then, foreclosures have slowed as those banks have been working to fix their processes. According to foreclosure tracker RealtyTrac, foreclosure activity fell again in September, to near post-bubble lows. But the data appears to suggest that foreclosures activity is actually poised to rise again soon.

Here's a chart showing just monthly default notices, a component of RealtyTrac's foreclosure activity measure (the other components two are auctions and bank repossessions):

default notices 2011-09.png

In September, default notices actually fell by about 10%. So how does this show that foreclosures could be ramping up? Because they jumped by 33% in August. At the time, that could have been interpreted as just a blip, but the numbers didn't fall in September nearly as much as they rose in August. As the chart shows, we haven't seen two consecutive monthly default notice tallies above 70,000 since December-January.

This is the earliest stage of foreclosure, so this should imply that auctions and repossessions will increase in the months to come as well. That is, unless default notices do end up falling back to levels closer to 60,000 again this winter. But with two consecutive months of relatively high default notices, we might be seeing banks becoming more comfortable with their new procedures and ramping up foreclosures from here on out.

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