Foreclosure Filings Hit Three-Year Low as U.S.

U.S. foreclosure filings fell last month to the lowest level in three years as lenders under legal scrutiny struggled to process a backlog of defaults and put new systems in place for home seizures, RealtyTrac Inc. said.

A total of 225,101 U.S. properties received notices of default, auction or repossession, down 14 percent from January and 27 percent from February 2010, the Irvine, California-based data seller said today in a statement. The number was the lowest since February 2008, and the year-over-year decrease was the biggest since the company began keeping records in 2005.

Loan servicers are moving slowly in resuming foreclosures amid a five-month-old investigation by state attorneys general into flawed paperwork and improper procedures. Delays in processing defaults are creating a clogged pipeline that may postpone home prices from reaching a bottom, according to Celia Chen, an economist for Moody’s Analytics Inc.

“It’s clearly taking the lenders and servicers longer than anyone had anticipated,” Rick Sharga, RealtyTrac’s senior vice president, said in an e-mail. “Beyond that, the industry itself is in a state of dysfunction.”