Foreclosures Jumping By Double Digits As Pre-Pandemic Activity Returns

Overall foreclosure rates were up 11% month-over-month in February as foreclosure starts soared, according to ATTOM’s February 2022 U.S. Foreclosure Market Report.

A total of 25,8333 properties had foreclosure filings (default notices, scheduled auctions, or bank repossessions). This is a 129% increase from the same time last year.

Rick Sharga, executive vice president at RealtyTrac, an ATTOM company, said foreclosure activity this year will mimic February’s growth.

“This isn’t an indication of economic turmoil, or of weakness in the housing market; it’s simply the gradual return to normal levels of foreclosure activity after two years of artificially low numbers due to government and industry efforts to protect financially-impacted homeowners from defaulting,” he said.

Foreclosures hit their lowest level ever recorded by ATTOM in 2021, down 95% from a peak of nearly 2.9 million in 2010.

Foreclosure starts rose in 40 states and D.C., up 40% from last month and a whopping 176% YOY. California led the way with 1,868 starts, followed by Florida (1,527); Texas (1,488); Illinois (1,168); and Ohio (1,144).

But foreclosure completions fell from January. Lenders repossessed 2,634 U.S. properties through completed foreclosures (REOs), down 45% from January but up 70% YOY.

Of states with 100 or more REOs, Michigan saw the largest declines (-81%), followed by Texas (-58%), California (-52%), Florida (-43%), and New Jersey (-27%).

“The reduced number of foreclosure completions suggests that much of the activity we saw in January was a result of mortgage servicers catching up on processing loans that had been in foreclosure or very seriously delinquent prior to the pandemic and the moratorium,” Sharga noted.

“We can expect more month-to-month volatility as servicers and the court systems work through some of these backlogs.”

Sky-high equity is expected to protect some homeowners from foreclosure in the coming year. Homeowners gained $2.6 trillion in tappable equity in 2021, the largest annual increase ever and more than double 2020’s record high of $1.1 trillion. The average homeowner gained $48,000.

But Black Knight has cautioned that equity doesn’t always save homeowners from foreclosure.

“Even among borrowers with 40% equity stakes who are referred to foreclosure, some 30% in recent years have lost their home to foreclosure sale, short sale, deed in lieu, etc,” Black Knight president Ben Graboske said.

“[G]iven 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.”