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Steve Chiotakis: Realty Trac released a gloomy foreclosure report this morning.
One out of every 418 U.S. homes was foreclosed upon last month. Marketplace’s Nancy Marshall Genzer reports on what’s behind the numbers.

Nancy Marshall Genzer Realty Trac says foreclosures are up 6 percent over last year. That is the smallest annual increase in four years.

But Realty Trac senior vice president Rick Sharga says foreclosures have slowed only because banks are overwhelmed by foreclosure paperwork.

Rick Sharga: We’re running at roughly six to seven times the level of foreclosure activity the banks are set up to handle. It’s a little bit of a pig in a python scenario, where it’s just taking an awful long time to process the sheer volume of bad loans that are out there.

Sharga says we’re in the midst of a second wave of foreclosures, caused by unemployment. And Guy Cecala, who publishes the newsletter Inside Mortgage Finance, says we might need to brace ourselves for a third wave coming from
people who are underwater on their mortgages, owing more than their homes are worth.

Guy Cecala: Is that going to cause another if not wave, at least a ripple through the foreclosure thing of people just making a conscious decision to walk away from it.

Realty Trac’s Sharga thinks foreclosures will peak later this year.

In Washington, I’m Nancy Marshall Genzer for Marketplace.