At long last, the robo-signing scandal may have finally played out. As evidence, please note the August Surge in Mortgage Default Warnings.

The number of U.S. homes that received an initial default notice -- the first step in the foreclosure process -- jumped 33 percent in August from July, foreclosure listing firm RealtyTrac Inc. said Thursday.



The increase represents a nine-month high and the biggest monthly gain in four years. The spike signals banks are starting to take swifter action against homeowners, nearly a year after processing issues led to a sharp slowdown in foreclosures.



Foreclosure activity began to slow last fall after problems surfaced with the way many lenders were handling foreclosure paperwork, namely shoddy mortgage paperwork comprising several shortcuts known collectively as robo-signing.



Many of the nation's largest banks reacted by temporarily ceasing all foreclosures, re-filing previously filed foreclosure cases and revisiting pending cases to prevent errors.



Other factors have also worked to stall the pace of new foreclosures this year. The process has been held up by court delays in states where judges play a role in the foreclosure process, a possible settlement of government probes into the industry's mortgage-lending practices, and lenders' reluctance to take back properties amid slowing home sales.



In all, 78,880 properties received a default notice in August. Despite the sharp increase from July, last month's total was still down 18 percent versus August last year and 44 percent below the peak set in April 2009, RealtyTrac said.



Some states, however, saw a much larger increase.



California saw a 55 percent increase in homes receiving a default notice last month, while in Indiana they climbed 46 percent. In New Jersey, where last month a judged ruled that four major banks could resume uncontested foreclosure actions in the state under court monitoring, homes receiving a default notice increased 42 percent.

Huge Jump in Foreclosures Coming Up

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 percent 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 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.

Rising Default Notices and Foreclosures a Good Thing