Daren Blomquist of Auction.com on the Current State of the Distressed Marketplace

Daren Blomquist is vice president of market economics with Auction.com., Irvine, Calif. He analyzes and forecasts complex macro and microeconomic data trends within the marketplace and greater industry to provide value to both buyers and sellers using the Auction.com platform.

MBA NEWSLINK: The word “auction” conjures imagery that might not accurately describe how it applies in the mortgage industry. How do you define “auction?”

DAREN BLOMQUIST, AUCTION.COM: In the context of what Auction.com does, I would define auction as a transparent and competitive marketplace that allows for real-time price realization for both buyers and sellers.

In the U.S. real estate market, the biggest need for that auction environment has been in the arena of distressed property sales. That’s because of the stigma that prospective buyers often attach to distressed properties as well as the historically hidden and opaque nature of distressed sales — most notably the traditional courthouse foreclosure auction. The transparent, competitive and real-time nature of a true auction environment like Auction.com helps to mitigate the impact of the distressed property stigma and also creates a true marketplace for distressed properties that is open to all buyers — not just a select few insiders.

NEWSLINK: How does your company integrate into the industry? Do partners actively seek you out?

BLOMQUIST: We integrate into the mortgage servicing industry by providing distressed disposition of properties secured by delinquent loans where the homeowner cannot or does not want to retain the home. We partner with servicers to formulate the best disposition strategy that makes the best of a bad situation for all parties involved — mortgage servicers, investors who own the mortgage, and even the distressed homeowners.

Servicing partners often seek Auction.com out because we have proven that our transparent, competitive and real-time marketplace produces better outcomes for them and their clients — in the form of lower loss severity and expedited time to sell — while also producing better outcomes for distressed homeowners and neighborhoods — by discovering often-hidden home equity that can go back to the homeowner in the form of surplus funds at the foreclosure auction, and by returning distressed homes to retail-ready condition faster and with higher owner-occupancy rates.

NEWSLINK: 2020 and 2021 have been unusual years, to say the least. How have various forbearance/foreclosure actions by the federal and local governments impacted how you do business?

BLOMQUIST: As is the case with most businesses, Auction.com has largely shifted to work from home during the pandemic. That work-from-home trend, along with the broader stay-at-home trend we have seen during the pandemic, has increased demand from buyers on our platform. That is somewhat surprising given the uncertain economic conditions, but it makes sense given that many properties on our platform can be bid on and purchased from anywhere, including at home! In this vein we accelerated the launch of the remote bid feature on our mobile app during the pandemic. This remote bid feature allows bidders to bid remotely even on traditionally in-person courthouse foreclosure auctions in many parts of the country.

While volume of foreclosure sales is certainly down due to the much-needed forbearance and foreclosure moratoria, there is still a steady flow of foreclosure sales occurring on vacant and abandoned properties exempt from the moratoria. We are seeing continued strong demand for these properties in the form of record-high sales rates and price execution.

NEWSLINK: How would you compare what is happening right now to circumstances during the Great Recession?

BLOMQUIST: The pandemic-induced recession has been prime example of a shock to the economy and housing market that came from an external risk factor. The housing crisis that occurred during and after the Great Recession was a shock resulting from internal risk factors, namely overly risky mortgage underwriting and a wild west mortgage-backed securities environment. These internal risks undermined the fundamentals of a healthy mortgage and housing market. The bad news with an external shock is that it is much harder to predict; the good news is that it can be easier to recover from an external shock when the fundamentals of the mortgage and real estate markets are still strong — which they were going into this crisis.

NEWSLINK: These moratoria have to expire eventually. What then?

BLOMQUIST: I could write a whole article on this, but we believe the forbearance programs along with other industry efforts are setting the stage for an orderly disposition of distress once the pandemic wanes and the moratoria lift. After the moratoria are lifted, we would expect an increase in foreclosures off the artificially suppressed levels we’re seeing now, but the increase will be relatively gradual in nature and not in volumes large enough to derail the strength of the larger residential real estate market.

Our long-term forecast anticipates foreclosure activity rising above 2018 and 2019 levels and returning to about the level seen in 2017 — which was still a very good year for residential real estate market — but still well less than half the volume seen during the peak of the previous housing crisis.

(Views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes your submissions. Inquiries can be sent to Mike Sorohan, editor, at msorohan@mba.org; or Michael Tucker, editorial manager, at mtucker@mba.org.)