July’s foreclosures jumped 40% annually

How many pandemic forbearances ultimately transition into foreclosures won’t be clear for months, but early indications are that activity involving older loans is up, according to Attom Data Solutions.

Foreclosure filings — which include default notices, bank repossessions and scheduled auctions — accounted for 12,483 properties in July, down 4% from June but a 40% jump from 8,892 a year ago. A total of 6,572 mortgages started the foreclosure process in July. That number was down 4% from June of this year, and up 45% from 4,530 properties in July 2020.

While foreclosure proceedings will increase going forward with the government’s moratorium expired, the Consumer Financial Protection Bureau added caveats so delinquent borrowers have better chances to keep their homes. Much of the incoming volume will be from loans in default or houses abandoned prior to the pandemic due to the new rules and home price appreciation seen in many areas, according to Rick Sharga, executive vice president of Attom's consumer-facing business, RealtyTrac.

“Increased numbers of foreclosure starts may not result in a similar number of bank repossessions,” Sharga said. “Homeowner equity is at an all-time high, and many financially distressed borrowers should have the opportunity to sell their homes — probably at a profit — rather than lose them to a foreclosure auction.”

One in every 11,009 homes sat in a stage of the foreclosure process in July, but mortgage turmoil differs across the country. Nevada had the highest foreclosure rate at one in every 3,636 units. Delaware came next at one in every 4,206 units, followed by New Jersey’s one in 4,809.

Broken down by the 220 metro areas with populations above 200,000, Atlantic City, N.J., had the highest foreclosure rate at one in every 2,290 units. Macon, Ga., and Las Vegas trailed at one in every 2,853 and 2,884 units, respectively.

Some housing markets saw severe increases in foreclosure starts year-over-year. Among those with populations above 1 million and at least 100 starts in July, New York surged 134% annually, followed by 55% in Riverside, Calif., and 45% in Chicago.

Lender repossessions grew 5% monthly and 12% from the year before, totaling 2,418 properties in July. Illinois compiled the most REOs at 230, then came 172 in Florida, and 149 in Pennsylvania.