Foreclosures Drop Is Just a Drop in the Bucket

The headlines blared last week about a 27 percent drop in foreclosures, after RealtyTrac released their U.S. Foreclosure Market Report for February. On the surface, it looked like maybe it was positive. And most journalists covered the release as good news for the housing market. But when examined closely, it is perhaps just the opposite: another sign of how depressed the housing market really is.

To their credit, the professionals at RealtyTrac went on to give what seems to be a real analysis of what is going on: "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. Saccio, 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."

So, what exactly does that mean?