The rate of new foreclosures dropped to the lowest level in eight years as rising property prices erased negative equity and allowed more delinquent homeowners to sell without losing money.
The share of loans on which foreclosure actions were started declined in the fourth quarter to 0.54% from 0.7% a year earlier, the Mortgage Bankers Association said in a report today. The rate was the lowest since the third quarter of 2006, when home prices were just starting to fall in what would become the worst crash since the Great Depression.
The foreclosure crisis is fading for much of the country as the economy improves and Americans negotiate with banks for modifications or approval to sell for less than what’s owed. The jobless rate dropped last month to 6.6%, the lowest in more than five years. Home prices rose 11% in December from a year earlier, the 22nd straight increase, Irvine, Calif.-based CoreLogic Inc. reported this month.
"Foreclosures are back to the typical historic range," said Michael Fratantoni, chief economist for the Washington-based Mortgage Bankers Association, said in a telephone interview today. "The vast majority of loans that remain to be worked out are very old at this point."
About 75% of seriously delinquent loans in the fourth quarter were originated in 2007 or earlier, according to the Mortgage Bankers Association.
The rate of foreclosure starts peaked in 2009 at 1.42%. Since then, low mortgage rates and tight inventories have helped provide a foundation for the housing recovery.
The mortgage-delinquency rate, which measures loans at least 30 days behind and not in foreclosure, fell to a seasonally adjusted 6.39% in the fourth quarter from 7.09% a year earlier, according to the group's report. The percentage of loans in the foreclosure process dropped to 2.86% from 3.74% a year earlier. Both figures were the lowest since 2008.
The Miami metropolitan area had the highest foreclosure inventory rate of the top 25 markets in the fourth quarter, at 10.34%. That was down 1.09 percentage points from a year earlier.
Miami was followed by Tampa, Fla., with an 8.71% rate; Long Island, N.Y., at 7.17%; and Edison, N.J., at 6.19%.
States such as Florida, New York and New Jersey, which require court approval for repossessions, account for most of the loans in foreclosure. Of the 17 states that had a higher foreclosure inventory rate than the national average, 15 were judicial states.