Today’s bullish report on pending home sales came with a caveat from the Realtors:

“If banks would simply return to normal, sound underwriting standards and begin lending to more creditworthy borrowers, we’d get a much faster recovery in the housing sector,” said National Association of Realtors chief economist Lawrence Yun.

That part has been their mantra for months. No surprise there. But then:

“In addition, a nonsensical situation has developed recently in some states with HUD unable to complete foreclosure deals because of insufficient funds to pay attorney fees at closing, even with buyers offering the full listing price,” Yun added.

This was new to me, so I called over to HUD, and let’s just say they were not exactly thrilled with the Realtors’ statement.

HUD says what the Realtors are talking about only affects sales of HUD-owned foreclosures in six states in the Northeast, and dare I say the Northeast is not where the greatest volume of home sales are taking place right now anyway.

So this from HUD: “Closing on approved purchases of HUD-owned properties has been temporarily delayed in New England. Due to increased demands, funds for closing contracts in this region have been expended and HUD is currently negotiating new contracts. Once they are executed, closings will resume.

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Despite the fact that banks claim they are ramping up repossessions again and refiling foreclosure documents, the numbers don’t appear to prove that. Foreclosure filings fell 14 percent in February month to month and fell 27 percent year over year. That is the largest annual drop since RealtyTrac began running the numbers in 2005.

“Foreclosure activity dropped to a 36-month low in February as allegations of improper foreclosure processing continued to dog the mortgage servicing industry and disrupt court dockets,” said James J. Saccacio, chief executive officer of RealtyTrac.

“While a small part of February’s decrease can be attributed to it being a short month and bad weather, the bottom line is that the industry is in the midst of a major overhaul that has severely restricted its capacity to process foreclosures. We expect to see the numbers bounce back, but that will likely take several months. And monthly volume may never return to its peak in March 2010 of more than 367,000 properties receiving foreclosure filings.”

To prove the point, in this month’s report RealtyTrac broke out the numbers by judicial foreclosure states (where foreclosure documents are filed in court before a judge) and non-judicial foreclosure states; the former are where the banks froze most actions, but they are also slowing the process and going over procedures in non-judicial foreclosure states as well. 

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