Foreclosures are coming back

[Account Closed]

U.S. Foreclosure Activity Continues to Increase Despite Government Moratorium

Highest foreclosure rates in Delaware, Illinois, and Florida

Nationwide one in every 4,078 housing units had a foreclosure filing in Q1 2021. States with the highest foreclosure rates were Delaware (one in every 1,705 housing units with a foreclosure filing); Illinois (one in every 2,175 housing units); Florida (one in every 2,237 housing units); Indiana (one in every 2,397 housing units); and Ohio (one in every 2,500 housing units).

Among 220 metropolitan statistical areas with a population of at least 200,000, those with the highest foreclosure rates in Q1 2021 were Lake Havasu City, Arizona (one in every 518 housing units); Provo, Utah (one in 1,280); McAllen, Texas (one in 1,297); Shreveport, Louisiana (one in 1,353); and Atlantic City, New Jersey (one in 1,441).

Other major metros with a population of at least 1 million and foreclosure rates in the top 50 highest nationwide, included Cleveland, Ohio at No.6, Birmingham, Alabama at No. 9, Jacksonville, Florida at No. 12, Miami, Florida at No. 34, and Riverside, California at No. 39.

Foreclosure starts increase 3 percent from last quarter

Lenders started the foreclosure process on 17,652 U.S. properties in Q1 2021, up 3 percent from the previous quarter.

Those states that saw the greatest quarterly increase in foreclosure starts and had 500 or more foreclosure starts in Q1 2021, included California (up 36 percent); Ohio (up 25 percent); North Carolina (up 15 percent); Virginia (up 11 percent); and South Carolina (up 10 percent).

[Jeffrey Morrisey]

I just want to stress a little caution on this topic. Some of the info in the thread is a little behind the times from a banking perspective. For context, I managed a post foreclosure conventional mortgage claim department at one of these mid to large US banks during the pandemic.

Chances are, we aren't going to see another 2008-esq situation. Banks before didn't have any idea how to handle that kind of inventory, weren't able to scale repairs, and calculate accurate pricing on all the homes they had. They are much, much better now.

In my opinion, the most likely scenario we'll see is a smaller uptick in foreclosures, but a good amount of short sale opportunities. 

As someone stated above, the foreclosure uptick is mostly going to come from the flood gates opening on things currently in their pipelines. Banks have now been sitting on a year and a half of inventory in most cases. Things are at a crawl. However, new foreclosure inventory is not going to be in the same spot. The relief acts that paused foreclosures made it so that any and all non payments can and will be turned into a "bullet payment" that is due at the end of your mortgage term or when you sell the property.  In fact, I have seen a letter sent by several US Senators that was sent to the banks stating that if they hear about banks even suggesting to their customers that the loan balance is due immediately, they will go after them with full force and tie them up in regulation for years to come.

But, that doesn't mean you won't see an increase. All of the banks are going to attempt to go through a loan modification process with the customers to get them squared up. There will be a percentage that refuse to answer phones and letters and will basically allow the foreclosure process to happen out of fear and lack of understanding on the subject.

As stated above, I think some of the best opportunities will come from short sales. Banks can't handle this level of volume all at once. They can't even staff up for it right now because they aren't sure if that foreclosure deadline is going to move again. Because of this, they will most likely be open to short sales just to decrease some of the volume they have. Think of a snake trying to eat a pig. It's a large amount of loans trying to move through a well oiled process that is only built to handle 10% of that volume at a time. Processes, databases, and procedures will break because of this. Now, if these short sales will be profitable for investors is another story. That will depend more on the location and the market.