Alternative Resolutions Ease Foreclosure Burdens
Alternative resolutions continue to drive a national decrease in the number of completed foreclosures.
Findings from the CoreLogic National Foreclosure Report for July show the number of foreclosures completed from July 2011 to July 2012 decreased 16%, confirming that “alternative resolutions” are indeed helping reduce foreclosure rates.
Mark Fleming, chief economist for CoreLogic, credited the improvement to a more aggressive loss mitigation approach implemented by mortgage servicers who are “increasingly relying on alternatives to the foreclosure process, such as short sales and modifications.”
The annual decline, however, does not change the overwhelming presence of foreclosures in five states: California, Florida, Michigan, Texas and Georgia, which together account for 48.1% of all foreclosures completed nationwide.
The concentration of half of the country’s foreclosures in a few states matters as it is likely to affect the speed of the housing market recovery in these areas.
According to the report, which provides monthly data on completed foreclosures and the overall foreclosure inventory, in July 2012 the number of completed foreclosures in the U.S. was 58,000, down from 69,000 in July 2011.
In June the number of completed foreclosures had dropped to 62,000.
These changes have triggered home price improvements Fleming and other insiders called indicative of a market turnaround.
“Home prices are responding positively to reductions in both visible and shadow inventory over the past year,” Fleming noted, because shadow inventory declines translate into fewer distressed sales that “help sustain price appreciation.”
Data increasingly indicate “the residential housing market may have turned the corner,” this year, stated president and CEO of CoreLogic, Anand Nallathambi. If improvements persist, he argued, “second-half declines over the past three years” will continue.
CoreLogic data show approximately 3.8 million homes were lost to foreclosures across the country since the financial crisis began in September 2008.
By July 2012 the number of foreclosed homes had declined to 1.3 million, or 3.2% of all homes with a mortgage, which marked a further reduction in the number of homes going into foreclosure compared to 1.5 million, or 3.5%, in July 2011.
Nallathambi called the decline in completed foreclosures as “yet another positive signal that the housing market is continuing on a progressive path of stabilization and recovery," that in part is driven by alternative resolutions.
Changes, however, could be seen differently if other findings are factored in. For example, the national foreclosure inventory—which represents the share of all mortgaged homes in some stage of the foreclosure process—was unchanged from June 2012 to July 2012. And that may also be an indication of a slow progress in month-over-month delinquency resolution.
Gains so far are still fragile. A full recovery does not appear to be near in some states where the foreclosure inventory is high and weather conditions are unpredictable.
For example, findings from the July 2012 report show at 11.2% Florida is one of the top five states with the highest foreclosure inventory as a percentage of all mortgaged homes, along with New Jersey 5.7%, New York 5.2%, Illinois 4.9% and Nevada 4.7%.
Also in July 92,000 homes were lost to foreclosures in Florida, ranking it second among the top five states with the highest number of completed foreclosures that was surpassed only by California with 118,000 completed foreclosures.
Plus, new residential property damage risks are likely to hit Florida again as Hurricane Isaac approaches its shores. It could cause over $27 billion in damages along the Gulf Coast.
Tropical Storm Isaac is predicted to strengthen into a Category 1, said Howard Botts, vice president and director of database development for CoreLogic Spatial Solutions, in a press release, warning that roughly 5,600 properties in Pensacola and Tallahassee would be among the major metro areas at risk of hurricane-driven storm.