by CNBC Diana Olick - new wave of foreclosures coming

"Bank of America is ramping up its foreclosure processing,
sending out far more notices of default to borrowers in August
than in previous months, well over 200% more month-to-month. A
notice of default is the first stage of the foreclosure process
in non-judicial foreclosures states, that is, where foreclosures
do not go before a judge. The notice of default is usually sent
when a borrower is 90 days or more overdue in payments, but that
timeline has been extended significantly during this housing
crisis, due to the so-called 'robo-signing' processing scandal
and the sheer volume of troubled loans.

Mortgage and housing analyst and strategist Mark Hanson alerted
me to unusually high legal default filing activity, and his
research points to Bank of America as the primary driver. I
contacted a Bank of America spokesman, who responded: 'It
appears the numbers you noted to me this afternoon generally
track with our own numbers for key categories. It should be
noted it’s driven more in key states like California and Nevada
than overall, and certainly the progress we’re seeing is limited
to non-judicial states. Judicial states continue to move very
slowly, with key states like New Jersey only beginning to start
processing foreclosures again this month.'

The foreclosure numbers are down very slightly year-over-year,
but only because August 2010 was one of the highest foreclosure
months on record, and of course was just before the
'robo-signing' scandal was uncovered. Delays in processing have
artificially lowered the foreclosure numbers over the past year,
so this new surge is likely addressing loans that have been long
delinquent, but unaddressed. In other words, the foreclosure
pipeline is filling again. RealtyTrac, a widely followed
foreclosure sale and data site, is also confirming a surge in
overall notices of default in its August numbers, to be released
later this week. They do not cite Bank of America specifically,
which bought Countrywide Financial, taking on millions of
troubled loans. 'We've been seeing REO [bank-owned property]
sales, and processing of loans through foreclosure. This
increase may simply be the lenders and servicers starting the
next cycle. August traditionally is a high month for foreclosure
actions, so part of the increase might be seasonal,' says
RealtyTrac's Rick Sharga. 'Could be any number of reasons - but
with 3.5 million delinquent loans, this had to happen sooner or
later.'

The question of course is, is this a one month catch-up purge or
will it continue at high levels for a while? And if the latter,
will other banks follow suit quickly? Because if other banks see
Bank of America pushing more loans to foreclosure, which will
inevitably means more properties heading out for sale, they may
want to get in before that glut of properties pushes prices down
even further. 'This proves once again that 'credit' as measured
by legal defaults and foreclosures is not necessarily about
borrowers missing payments, rather about what the servicers
chose to do about it,' notes Hanson."