Foreclosure Reports Cite Decades-Low Activity

Two reports this week said foreclosure and delinquency rates on mortgages fell to levels not seen since before the Great Recession.

ATTOM Data Solutions, Irvine, Calif., yesterday reported 191,824 U.S. properties with foreclosure filings in the third quarter, down 13 percent from the previous quarter and down 35 percent from a year ago to the lowest level since second quarter 2006.

The company’s Q3 2017 U.S. Foreclosure Market Report said foreclosure activity in the third quarter was 31 percent below the pre-recession average of 278,912 properties with foreclosure filings per quarter between Q1 2006 and Q3 2007, the fourth consecutive quarter where U.S. foreclosure activity has tracked below the pre-recession average.

ATTOM reported foreclosure activity below pre-recession levels in 57 percent of metro areas surveyed; foreclosure starts rose in 24 percent of markets, including Dallas, Denver and Cincinnati; and 2014-vintage FHA loans posted the highest foreclosure rate of any FHA loan vintage since 2009–29 percent above the historic average for FHA loans although still 55 percent below the peak in 2007.

Earlier this week, CoreLogic, Irvine, Calif., reported 4.6 percent of U.S. mortgages in some stage of delinquency in July, down by nearly 1 percent from a year ago. The company’s monthly Loan Performance Insights Report said the national foreclosure inventory rate fell to 0.7 percent in July, down from 0.9 percent a year ago and the lowest rate since July 2007.

CoreLogic said the rate for early-stage delinquencies (30-59 days past due) fell to 2 percent in July, down from 2.3 percent a year ago. The share of mortgages 60-89 days past due in July held steady at 0.7 percent from a year ago. The serious delinquency rate (90 days or more past due) declined to 1.9 percent in July from 2.5 percent a year ago and remains near the 10-year low of 1.7 percent reached in July 2007.

“Legacy foreclosures from the high-risk loans originated between 2004 and 2008 have largely been cleared out of the distressed market pipeline,” said Daren Blomquist, senior vice president with ATTOM Data Solutions. “Meanwhile loans originated during the housing boom of the last five years are posting foreclosure rates below historic averages, with the notable exception of FHA loans originated in 2014, which have the highest foreclosure rate of any FHA loan vintage since 2009.”

Blomquist said elevated foreclosure rates on 2014 vintage FHA loans reflect a gradual loosening of credit as the sustained housing boom is slowly bolstering confidence and increasing risk tolerance in the real estate market. “This trend also explains increasing foreclosure starts in the third quarter in some of the nation’s hottest housing markets, counter to the national trend,” he said. “If we see this pattern continue for 2015- and 2016-originated loans as those vintages age, we would expect to see a more widespread–although still relatively modest–lift in foreclosure activity in the next few years.”

ATTOM reported lenders started the foreclosure process on 93,724 U.S. properties in the third quarter, down 7 percent from the previous quarter and down 16 percent from a year ago to the lowest level since Q2 2005. Third quarter foreclosure activity was below pre-recession averages in 123 of the 217 metro areas analyzed in the report (57 percent), including Los Angeles (55 percent below), Chicago (20 percent below), Dallas (77 percent below), Houston (63 percent below), and Miami (51 percent below).

States with the highest third quarter foreclosure rates were New Jersey (one in every 238 housing units with a foreclosure filing); Delaware (one in every 276); Maryland (one in every 363); Illinois (one in every 426); and Ohio (one in every 455).

Among 217 metropolitan areas with at least 200,000 people analyzed in the report, those with the highest foreclosure rates in the third quarter were Atlantic City, N.J. (one in every 150 housing units with a foreclosure filing); Trenton, N.J. (one in 234); Cleveland (one in 275); Fayetteville, N.C. (one in 283); and Columbia, S.C. (one in 284).

The report said lenders completed the foreclosure process on 55,993 U.S. properties in third quarter, down 29 percent from the previous quarter and down 35 percent from a year ago to the lowest level since Q3 2006. Properties foreclosed in the third quarter had been in the foreclosure process an average of 899 days, up from 883 days the previous quarter to a new high.

States with the longest average time to foreclose in the third quarter were Indiana (1,779 days), New Jersey (1,281 days), New York (1,256 days), Florida (1,234 days), Illinois (1,087 days) and Connecticut (1,001 days). States with the shortest average time to foreclose were Virginia (171 days), Arkansas (296 days), Oregon (341 days), North Carolina (417 days) and Texas (437 days).