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Mortgage Performance: Foreclosure statistics are showing signs of recovery

By Chris Porter | January 25, 2017

According to a recent foreclosure report issued by the Corelogic, the statistics at the end of 2016 are showing signs of recovery to the pre-crisis level. The foreclosure rate is down to 0.8 percent as compared to 1.2 percent at the end of 2015. This 0.8 percent foreclosure rate is commensurate with the pre-crisis average foreclosure rate of 0.6 percent between 2000 and 2006.

Realty Biz News recently reported that Foreclosure filings jumped by 27 percent in October 2016 compared to the previous month, having previously hit their lowest level in 129 months in September. Despite this brief blip, the national foreclosure inventory, which comprises of all the mortgage loans in the foreclosure process, is down by 30 percent on a year over year basis. This foreclosure inventory has fallen every month since 2011 and at the end of 2016 it was 79.2 percent lower than the January 2011 peak level. Figure 1 below illustrates a year over year change in both the foreclosure and serious delinquency inventory. According to the report, North Dakota was the only state in which foreclosure rate increased on a year over year basis. However, the increase was negligible as the foreclosure rate remained at 0.4 percent in North Dakota.

Along with this, the serious delinquency rate, which comprises of mortgage loans that are overdue for more than 90 days, was down to 2.5 percent as compared to 3.3 percent at the end of last year. Also the inventory of mortgages in serious delinquency at the end of 2016 is down by 22.1 percent on a year over year basis. This inventory of mortgages in serious delinquency is down by 72.6 percent from its 2010 peak level. According to the report, the only state that experienced a year over year increase in serious delinquency rate is Wyoming. A Toronto CPA, who works with Canadian real estate investors, is seeing an increase in U.S. based real estate interest as a result of improved fundamentals.

According to the Corelogic report, the judicial states (states where a lender must provide evidence of delinquency to the court in order to move a mortgagor into foreclosure) continued to have a higher foreclosure rate at 1.4 percent as compared to the non-judicial states (states where the lenders can issue notices of default directly to the borrower without court intervention) where the foreclosure rate remains at 0.4 percent at the end of 2016. This foreclosure rate in non-judicial states is equal to the pre-crisis foreclosure rate of 0.4 percent while the foreclosure rate in judicial state is still 1.7 percent higher than the pre-crisis rate of 0.8 percent. The judicial states has 42 percent share in the total outstanding mortgage loans. Out of this, 69 percent of the loans are facing a foreclosure. Figure 2 below clearly illustrates the judicial and non-judicial states foreclosure rates.

“The decline in serious delinquency has been substantial, but the default rate remains high in select markets,” says Dr. Frank Nothaft, chief economist for CoreLogic. “Serious delinquency rates were the highest in New Jersey and New York at 5.6 percent and 5 percent, respectively. In contrast, the lowest delinquency rate occurred in Colorado at 0.9 percent, where a strong job market and home price growth have enabled more homeowners to stay current.” To give you a better picture, Canadian real estate mortgages in arrears was at 0.3% (as at November 2016).


"Chris Porteous has significant experience in the financial markets with stints at Goldman Sachs, UBS Securities and DBRS. At DBRS, Chris extensively covered the Mortgage Backed Securities market, Covered Bonds and regulatory changes involved in the real estate markets. Chris currently runs a personal Real Estate Investment Trust with over 15 properties located in South Florida."
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