SERIOUS MORTGAGE DELINQUENCY RATES REBOUND IN U.S. METROS
Latest data show foreclosure problems continue to
plague metropolitan U.S.
WASHINGTON—After more than six quarters of declining rates of
serious mortgage delinquency in the metropolitan U.S., the rates of serious
delinquency are climbing back from their June 2011 low according to the latest
data from Foreclosure-Response.org. Serious delinquency, defined as the
share of loans in foreclosure plus the share of loans delinquent 90 or more
days, rose from 9.2% in June 2011 to 9.7% in Dec. 2011 for the nation’s 100
largest metro areas, reaching the same rate as a year before. The 90+-day
delinquency component of the figure remained relatively flat at 3.8%, roughly
where it has remained for the past four quarters. However, the share of homes in
foreclosure continues to rise, and now stands at 5.9%. The average rate for all
366 metro areas has been following the same pattern.
The data from the 100 largest metros suggest that the
force behind rising foreclosure rates has been a buildup of foreclosed homes,
especially in states that require a judicial foreclosure process, where courts
must make a final decision about a property before it can exit foreclosure. In
metros in judicial foreclosure states, the average foreclosure rate stood at
7.2% in Dec. 2011, while metros in states without a judicial foreclosure process
had an average rate of 4.7%. Moreover, the foreclosure rate in judicial areas
has grown every quarter since March 2009, when Foreclosure-Response.org
began tracking the data, while foreclosure rates in non-judicial metros have
remained roughly flat for the last five quarters.
However, Center for Housing Policy Senior Research
Associate Maya Brennan, a member of the Foreclosure-Response.org team,
cautions that it is not the judicial foreclosure process itself that is the
source of the problem, but rather inadequate judicial resources applied to
resolve the backlog of foreclosures on the docket.
“We don’t mean to suggest that states with a judicial
foreclosure process should end that practice,” commented Brennan. “Review by the
courts offers safeguards for borrowers and opens alternative ways to resolve
foreclosure, like mediation. Devoting more judicial resources to processing the
high volume of foreclosures would help ensure due process without burdening
homeowners, lenders, and neighborhoods with unreasonably long foreclosure
timelines.”
Nearly half of the 100 largest U.S. metro areas (46)
are located in states with a judicial foreclosure process. Foreclosure backlog
is particularly acute in the housing markets of many metro areas in New York,
the state with the longest average foreclosure process, as well as in Florida
and Ohio, two more judicial process states. However, being in a non-judicial
state does not guarantee a low rate of foreclosures and 90+-day delinquencies. A
number of metro areas, including Memphis, Las Vegas and several cities in
California’s Central Valley, continue to show high levels of serious
delinquency, perhaps reflecting continued economic challenges as well as
temporary foreclosure delays.
A perfect storm in Florida
Florida is notable as a state that both has a judicial
foreclosure process and was hit extremely hard by the foreclosure crisis.
Foreclosure trends in Florida metros have mirrored the average figure for the
100 largest metros, but the foreclosure rate has grown at a much faster clip.
While the national foreclosure rate in the top 100 metros grew by 1.8 percentage
points during the March 2009 to Dec. 2011 period for which
Foreclosure-Reponse.org has data, in Miami, Orlando and Jacksonville,
foreclosure rates have grown by more than 5 percentage points over the same
period.
Statewide, the average property is stuck in the
foreclosure process for more than 800 days before exiting, likely due to
inadequate judicial resources. However, the state is working to address the
problem. This year Florida re-hired retired judges to help manage the case load
of backlogged foreclosures.
“The foreclosure backlog appears to have been far too
great for the courts in judicial review states to process without additional
staffing,” said Rob Pitingolo, research assistant at the Urban Institute and
author of the study. “On the other hand, in states without a judicial review
process, foreclosures move through more quickly but borrowers may more easily
fall victim to fraud and other abuses. To protect homeowners and return
stability to the market, all states need to find a way to process foreclosures
that balances expediency with fairness.”
The Foreclosure-Response.org data—released quarterly by the Center
for Housing Policy, Urban Institute and Local Initiatives Support Corporation
(LISC)—provides numbers for the housing markets of all 366 U.S. metro areas.
Analysis focuses on the 100 largest metro areas to avoid comparing very small
and very large metro areas. New findings in this edition include an analysis of
the relationship between an area’s foreclosure process and serious delinquency
rates, and regional comparison of those statistics.
Key findings from the December data:
- Rates of serious mortgage delinquency are rebounding in the 100 largest U.S. metro areas, after a downward trend between December 2009 and June 2011. The serious delinquency rate stands at 9.7% as of December 2011—back to its rate one year ago. It remains to be seen whether the rate will stabilize or return to its national peak from December 2009 of 10.5%.
- The rebound in the serious
delinquency rate reflects a steady increase in the foreclosure rate over the
past three years. The December 2011
foreclosure rate reached 5.9% for the 100 largest metropolitan areas. Meanwhile,
the 90-plus day delinquency rate has leveled-off and now stands at 3.8%. These
two components form the serious delinquency rate.
- The high foreclosure rate
reflects a backlog of homes in the foreclosure process for an extended period of
time. Extremely protracted
foreclosure processes are typically found in judicial foreclosure states where
court review is required before completing a foreclosure. When foreclosure
filings exceed the court's capacity, properties can enter a lengthy foreclosure
limbo.
- Looking at the nation’s 100
largest metros, the difference between foreclosure rates in judicial and
non-judicial areas is sharp. In
judicial areas, the average foreclosure rate as in December 2011 was 7.2% while
the average rate in non-judicial areas was 4.7%.
- Judicial states may need to
increase their courts' capacity to complete foreclosure cases in order to process this backlog and stabilize
affected communities. Switching to non-judicial processes is another option, but
could limit safeguards for borrowers and reduce opportunities to identify
non-foreclosure solutions through mediation.
The new data are the latest in a series
of quarterly data, released by the Foreclosure-Response.org team first in late
2010, that provided the first-ever data on serious delinquency rates for all 366
U.S. metros.
More detailed analysis
about the largest 100 metropolitan areas, information on the methodology, and a
complete ranking of all 366 U.S. metropolitan areas are available at: Foreclosure-Response.org
Foreclosure-Response.org is a joint project of the Local Initiatives Support Corporation, Urban Institute and the Center for Housing Policy. The site provides data on foreclosures at both the metro area and local levels, as well as information on promising state and local policies for preventing foreclosures and stabilizing communities impacted by foreclosures. Foreclosure-Response.org is funded through grants from the Ford Foundation, Annie E. Casey Foundation and Fannie Mae.
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