Foreclosures Activity Hits Record Low

ATTOM Data Solution’s Year-End 2021 U.S. Foreclosure Market Report found foreclosure filings dropped 29% from 2020 and were down 95% from a peak of nearly 2.9 million in 2010. It is the lowest level since ATTOM began tracking filings in 2005.

Properties with foreclosure filings–default notices, scheduled auctions, and bank repossessions– made up 0.11% of all U.S. housing units, down from 0.16% in 2020.

“The COVID-19 foreclosure tsunami that some people had anticipated is clearly not happening,” said Rick Sharga, executive vice president at RealtyTrac, an ATTOM company. 

The report is heartening from a broad view of foreclosure filings in the US. However, it found that filings increased as protections expired, pushing rates closer to pre-pandemic levels. A total of 56,174 U.S. properties had foreclosure filings in Q4 2021, up 23% from Q3 and 82% year-over-year (YOY). 

December saw some improvement, with filings down 12% from November but still up 55% YOY. The states with the highest foreclosure rates in December were Nevada, Florida, Illinois, Delaware, and New Jersey.

Lenders completed the foreclosure process on 3,093 properties in December, a 33% increase from November and a 54% increase YOY.

But filings are returning slowly, and 2022 should see a moderate climb back to normal levels, Sharga noted.

“Government and mortgage industry efforts have prevented millions of unnecessary foreclosures, and while it’s likely that we’ll see a slight increase in the first quarter, we probably won’t see foreclosure activity back to normal levels before the end of 2022,” he said.

Sharga also expects repossessions to remain low in 2022 due to the record-breaking levels of equity homeowners currently possess. More than 87% of homeowners in foreclosure have positive equity.

“This means that most borrowers will have an opportunity to sell their house at a profit rather than lose everything to a foreclosure auction.”

Not all homeowners with equity will avoid foreclosure, however. A Black Knight analysis of data going back to 2007 found that equity might not ensure struggling homeowners won’t have their homes repossessed.

For homeowners who were 120 or more days late, having high equity did not significantly change the likelihood of being recommended for foreclosure, and thirty percent of borrowers recommended for foreclosure with 40% equity stakes lost their homes.

“What the data doesn’t tell us is why so many people who could avoid involuntary liquidation by selling through traditional channels simply do not end up doing so,” said Black Knight Data & Analytics President Ben Graboske. 

“Whether that’s due to lack of understanding of their equity positions or the foreclosure process, in general, is unclear. But given the large number of high equity homeowners currently struggling to make their payments, this represents a significant challenge for the industry: how to educate struggling homeowners on the post-forbearance, foreclosure, and – if needed – home sale processes, to limit unneeded stress on homeowners and the market alike.”