Data Sugarcoat The Foreclosure Reality

Yet another RealtyTrac U.S. Foreclosure Market Report blends in with recent past industry news that ultimately sugarcoat a reality where the effects of the economic crisis and foreclosure processing delays due to regulatory requirements or pending litigation often are immensurable.

The July 2011 RealtyTrac U.S. Foreclosure Market Report shows foreclosure activity dropped to a 44-month low.

In a nutshell, according to RealtyTrac’s chief executive James Saccacio, data reiterate that while the country hopes for a stabilizing economy and improving job market, which represent “the long-term keys to a housing market recovery,” all that is available as a means of foreclosure cure and prevention is a combination of foreclosure processing delays and “the smorgasbord of national and state-level foreclosure prevention efforts.”

However, even though mortgage foreclosure analytics suffer from the unavoidable hindsight limitations of statistics, there is some trend of consistency.

RealtyTrac’s data show in July foreclosure filings (default notices, scheduled auctions and bank repossessions) were reported on 212,764 properties, up 4% month-over-month and 35% year-over-year—with one in every 611 housing units in the country received a foreclosure filing in July. It marks the 10th straight month of year-over-year decreases in foreclosure activity and the lowest monthly total since November 2007.

“Initially triggered by the robo-signing controversy” in October 2010, Saccacio said, the downward trend is now affected by foreclosure prevention efforts such as loan modifications, lender-borrower mediations and mortgage payment assistance for the unemployed. He expects these short-term interventions and delays “will extend the current housing market woes into 2012 and beyond.”

Tim Martin, group vice president of the U.S. Housing Market in TransUnion’s financial services business unit, is equally pessimistic. In his view, certain improvements in mortgage delinquencies for six straight quarters while the pace of said improvement “seems to be picking up speed” are far from game changing.

The current delinquency level is “nearly three times higher than the pre-recession norm” indicating the likelihood to see the current pace of improvement translate into so-called normal delinquency rates may not be possible before the end of 2015.

The Chicago-based financial data analytics provider reported a 5.82% decrease in the national rate of borrowers 60 days or more past due on their mortgage at the end of the second quarter, compared to the first quarter. The delinquency rate dropped for the sixth consecutive quarter and “more than any time since the recession officially ended two years ago.”

According to TransUnion, between the first and second quarters of 2011 all 50 states reported declines in mortgage delinquency rates. In the second quarter 79% of all metropolitan statistical areas saw declines in their mortgage delinquency rates, compared to only 68% in the first quarter and 44% in the last quarter of 2010.

In its 2011 outlook, TransUnion said it expects mortgage borrower delinquency rates “will continue to drift downward” as tighter lending standards that offset the impact of falling home prices and the high unemployment rate, which together “continue to exert upward pressure on delinquency rates.”

This outlook counts on “the greater willingness” of good credit borrowers “to repay their debt obligations in the face of high unemployment rates” even if house prices continue to edge downward throughout the year. Because of these dynamics, Martin argues, “lenders today take a much closer look at the borrower’s income history and overall debt situation than before the recession began in 2007.”

At the same time foreclosure activity continues to show more of the same type of traction and status quo among worst-performing states.

RealtyTrac reported a decrease of 7% month-over-month and 39% from July 2010 in default notices filed for the first time, dropping 58% below the monthly peak of 142,064 default notices in April 2009. Scheduled foreclosure auctions in July decreased 5% from June and 37% July 2010 hitting a 36-month low at 46% below the monthly peak of 158,105 scheduled auctions in March 2010. The number of lender-repossessed properties or REOs declined a slight 1% from June and 27% from July 2010 and 34% below its monthly peak in September 2010.
Nevada, California, Arizona remain at the top of the country’s state foreclosure rates lead by Nevada for the 55th straight month in July, which nonetheless reported a decrease of 1% from June and 28% from July 2010.

Consistent with recent past data the other top 10 foreclosure rate states—which together accounted for 73% of the total U.S. foreclosure activity in July--were Georgia, Utah, Florida, Michigan, Idaho, Illinois and Wisconsin.