Foreclosure risk is now propelled by natural disasters: Attom
Natural disasters are now the leading driver of lenders' foreclosure risk, with last year's hurricanes causing a rise in third-quarter filings in affected markets, according to Attom Data Solutions.
Overall, total foreclosure filings — properties with a default notice, scheduled for auction or repossessed by a bank — fell to their lowest level since the end of 2005.
There are 177,146 properties with a foreclosure filing, down 6% from the second quarter and 8% from the third quarter of 2017.
Lenders started new foreclosures on 91,849 properties in the quarter, down 6% from the second quarter and 3% from the year prior.
"The biggest foreclosure risk in today's housing market comes from natural disaster events such as the twin hurricanes of a year ago," Daren Blomquist, senior vice president at Attom Data Solutions, said in a press release. "Foreclosure starts spiked in the third quarter in many local markets impacted by those hurricanes."
There are typically moratoria and forbearances following natural disasters like hurricanes and wildfires, but once those end borrowers who are unable to cure can be subject to a foreclosure action.
On the other hand, the foreclosure risk associated with the poorly underwritten mortgages from the mid-2000s faded, he said, as "average foreclosure timelines have dropped to a two-year low, and the share of foreclosures tied to 2004 to 2008 loans has dropped well below 50%."
Among the 15 states that posted year-over-year increases in foreclosure starts in the third quarter were Florida, up 25%, and Texas, up 3%.
Nationwide, one in every 757 properties had a foreclosure filing. New Jersey had the highest rate, one in every 267 properties, and that was an improvement of 8% from the second quarter and 11% from one year prior.
Florida had the fourth highest rate, one in every 449 properties, up 7% from the second quarter and 2% from the third quarter of 2017. It has the most filings of any state at 20,382.
In Texas, the rate was one in every 1,020 properties, down 14% compared with the second quarter but up 6% from the third quarter last year.
"Secondarily, we are seeing relatively modest — but more widespread — foreclosure risk associated with Federal Housing Administration loans originated in 2014 and 2015," said Blomquist.
The 2014 vintage in particular has the fourth highest foreclosure rate among FHA loans originated since 2003, and the highest rate since the 2008 vintage.