8.8% of the US Mortgages are in Foreclosure.
A curator of the nation’s premier property database, ATTOM Data Solutions, which is also the first property data provider of Data-as-a-Service (DaaS), released its February Foreclosure Market Report on April 1. According to the report, there were a total of 48,004 US properties with foreclosure filings, default notices, scheduled auctions, or bank repossessions. This figure also is the lowest number of total foreclosure filings recorded since the data provider began tracking in April 2005.
“Foreclosure activity across the United States hit new lows in February, yet another marker of the nation’s long housing boom,” states the chief product officer of ATTOM Data Solutions, Todd Teta. “However, as with just about anything connected to the housing market right now, the foreclosure situation is now totally in flux because of the ever-evolving coronavirus pandemic. Many lenders have suspended foreclosure proceedings, so the numbers will most likely continue to drop in the coming months. But after that, we may see an uptick in foreclosures as a result of dramatic economic impacts, such as more homeowners losing their jobs and falling behind on mortgage payments.”
The report shows that foreclosure completion numbers continue to decline on annual bases. Lenders repossessed 10,469 US properties through completed foreclosures (Real Estate Owned) in February 2020. This number represents a 1% increase from January but an 8% drop from last year, recording the second consecutive annual decrease in completed foreclosures.
Some states recorded an annual drop in Real Estate Owned properties (REOs) in February, according to the ATTOM Data Solutions reports. The states include Florida with a 47% drop, New York with an 18% drop, New Jersey with a 37% drop, Maryland with 13% drop, and Texas with a 16% drop.
Foreclosure rate.
According to the report, one in every 2,841 housing units had a foreclosure filing in February nationwide. The states with the highest foreclosure rates were:
- New Jersey with one in every 1,457 housing units with a foreclosure filing.
- Illinois with one in every 1,507 housing units.
- Delaware has one in every 1,628 housing units.
- South Carolina had one in every 1,688 housing units.
- Maryland with one in every 1,713 housing units.
Areas with the highest foreclosure rates in February among the 220 metropolitan statistical areas with at least 200,000 in population include;
- Bakers field, CA – one in every 948 housing units
- Atlantic City, NJ—one in every 1,032.
- Columbia, SC—one in every 1,042.
- Rockford, IL—one in every 1,049.
- Fayetteville, NC—one in every 1.089 housing units.
The metropolitan areas with a population of more than 1 million, with the most severe February foreclosure rates, include;
- Riverside, CA—one in every 1,109 housing units.
- Chicago, IL—one in every 1,314.
- Philadelphia, PA—one in every 1,393.
- Cleveland, OH—one in every 1,469.
- Baltimore, MD—one in every 1,605 housing units.
Moving on, the report further indicated that lenders started the foreclosure process on another 27,058 US properties in February 2020. The figure is a 3% increase from January but a 9% drop from 2019.
What causes Foreclosure?
You need to know some of the causes of Foreclosure so that you can be prepared. Some of the most common causes of Foreclosure include; negative equity, rising interest rates, and the five Ds.
Negative equity is a case where a home’s value declines, causing the homeowner to owe more to the lender than the home’s current worth. When negative equity occurs, the homeowner has only two options, to refinance if possible, or sell the home.
An interest rate rising case is when a home buyer purchases a home through mortgage at low-interest rates, only for the rates to shoot incredibly high later, making it difficult for the homeowner to keep up with mortgage payments. This case is mostly attributed to subprime mortgages, whose main recipients are those with lower credit scores, which worsens the situation.
Lastly, the five D’s refer to several personal situations that eventually lead to Foreclosure. They include; death, divorce, drugs, disease, and denial. Cases of death or divorce of/with the primary breadwinner, who used to make the mortgage payments, make it difficult to keep up with the payments; therefore, the only option is Foreclosure. Same case if the breadwinner turns to substance dependence to a point they can’t make the monthly mortgage payments, the home faces Foreclosure. Also, the emergence of unexpected medical bills that makes a homeowner bankrupt may lead to Foreclosure. Lastly, on denial, various factors may put a person in a financial distress situation, the person may not come into terms with the fact that their current situation is not compatible with staying in line with mortgage payments. When the lender realizes the situation, the best option is to start the foreclosure process.
Some of the causes stated above are avoidable, such as drugs and denial in some instances. Also, making proper research and consultation before applying for a mortgage could also keep you away from falling into negative equity and rise in interest rates pits.
Works cited
https://www.attomdata.com/news/market-trends/foreclosures/attom-data-solutions-february-2020-u-s-foreclosure-market-report/.
https://www.citywidehomeloans.com/common-causes-foreclosure/.