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  • Writer's picturePayton Legal Group

US foreclosure activity soars to almost pre-pandemic levels

167% increase from a year ago, but borrowers selling homes to avoid foreclosure auctions.

Lenders started the foreclosure process on a total of 67,249 properties across the US in Q3 - up by a staggering 167% from a year ago, according to a new report by real estate data firm, ATTOM. The increase was close to pre-pandemic levels and 1% up from the previous quarter.

The foreclosure process often starts when a borrower has received a default notice after missing four monthly mortgage payments in a row, although most lenders will reportedly send a notice of default when they are 90 days – or three months - past due.

ATTOM’s Q3 2022 US Foreclosure Market Report also showed there were 92,634 properties with foreclosure filings, including scheduled auctions or bank repossessions.

This was also up from a year ago (104%) and 3% from the previous quarter.

Moreover, a total of 31,836 properties had foreclosure filings in September, up 62% compared to the same period a year ago, but down 8% from the previous month.

Rick Sharga, executive vice president of market intelligence for ATTOM, nonetheless pointed out that although foreclosure starts had been rising since the end of the government’s foreclosure moratorium (June 30 for residential mortgages), they were still lagging behind pre-pandemic levels.

He said: “Foreclosure activity is reflecting other aspects of the economy, as unemployment rates continue to be historically low, and mortgage delinquency rates are lower than they were before the COVID-19 outbreak.”

The States with the largest number of foreclosure starts during the third quarter were California (7,368), followed by Florida (6,671), Texas (6,217), Illinois (4,702), and New York (3,997). The report also showed that New York topped the list of the 223 metropolitan areas with the highest number of foreclosure starts during the same period, followed by Chicago (3,950) and Los Angeles, (2,275).

In contrast, the metropolitan areas with a population of more than one million that saw a decline in foreclosure starts were Tulsa, Oklahoma (down 60%), Kansas City, Missouri (down 26%) and Birmingham, Alabama (down 25%).

Nationwide, one in every 1,517 properties had a foreclosure filing in Q3, and the States with the highest foreclosure rates during this period were Illinois (one in every 694 housing units), Delaware (one in every 825), New Jersey (one in every 855), South Carolina (one in every 971), and Ohio (one in every 1,027).

Bank repossessions increase

Lenders repossessed a total of 10,515 properties through foreclosure (REO) in Q3 - up 39% from a year ago and 18% from the previous quarter, although very few of the homes entering the foreclosure process reverted to the lender at the end of the foreclosure, according to Sharga. He added: “In fact, nearly three times more homes were repossessed by lenders in the second quarter of 2019 than in the second quarter of 2022. We believe that this may be an indication that borrowers are leveraging their equity and selling their homes rather than risking the loss of their equity in a foreclosure auction.”

The States that posted the largest number of completed foreclosures (REOs) in Q3 included Illinois (1,331), Michigan (729) and New York with 695.

The Takeaways

  • One in every 4,413 properties had a foreclosure filing in September.

  • States with the highest foreclosure rates in September 2022 were Illinois (one in every 1,959 housing units), Nevada (one in every 2,473), New Jersey (one in every 2,649), Maryland (one in every 2,825), and Ohio (one in every 2,885).

  • A total of 21,869 properties started the foreclosure process in September 2022, up 113% from a year ago.

  • Lenders completed the foreclosure process on 3,509 properties in September, up 31% from a year ago but down 11% compared to August 2022.

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