Foreclosure Activity Hits Record High in First Quarter
More than 800,000 properties received foreclosure filings in the first quarter of 2009, according to RealtyTrac's latest foreclosure report, released today. That was the highest quarterly total since RealtyTrac began issuing its numbers in the first quarter of 2005 despite a 13 percent decrease in bank repossessions (REOs) from the previous quarter. The increase was driven by a jump in default and auction notice filings on the front end of the foreclosure process, particularly in March when default notices were up 20 percent from the previous month and auction notices were up 29 percent from the previous month.
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“In the month of March we saw a record level of foreclosure activity — the number of households that received a foreclosure filing was more than 12 percent higher than the next highest month on record. Since much of this activity was in new foreclosure actions, it suggests that many lenders and servicers were holding off on executing foreclosures due to industry moratoria and legislative delays,” said James J. Saccacio, chief executive officer of RealtyTrac. “It’s also likely that the drop in REO activity can be attributed to these processing delays, rather than to any of the foreclosure prevention programs currently in place. It’s very likely that we’ll see the number of REOs increase again now that most of the moratoria have been lifted.”
“On a positive note, it appears that demand is up in some of the harder-hit areas, particularly on bank-owned REO properties that first time homebuyers and investors see as bargains,” Saccacio continued. “But it’s unlikely that this increased demand will be enough to offset the growing number of foreclosures in the pipeline, accelerated by rising unemployment rates.”
Although much of the pent-up foreclosure activity from previous months showed up in March's numbers, it appears that there continues to be some latent foreclosure activity that has not yet officially hit the foreclosure process based on an analysis of the relationship between the Mortgage Banker Association's delinquency rate and RealtyTrac's total properties with foreclosure filings. The projected RealtyTrac total would be more than1,000,000 properties with foreclosure filings for the first quarter based on the historical correlation between the two sets of numbers. While this correlation is somewhat slippery because of the dissimilarity in the two types of numbers being correlated (one is a percentage typically in the single digits and one is an integer typically in the hundreds of thousands), it does roughly demonstrate that some delinquencies are not translating to foreclosure as quickly as they have historically.
We'd like to know if this correlation supports what you are seeing in your market and if you think that is good some foreclosures are being delayed or if you think that will just cause more trouble down the road.