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Legacy Foreclosures Hide Mortgage Successes

Foreclosures fall in 2016There’s no doubt about it, 2016 was a bright spot for foreclosures, the best year since 2006. The latest figures from ATTOM Data Solutions show that in 2016 there were 933,045 foreclosure filings of all sorts — default notices, scheduled auctions and bank repossessions.

That’s down almost 14 percent from 2015.

“The national foreclosure rate stayed within an historically normal range for the third consecutive year in 2016, even as banks continued to clear out legacy foreclosures from the last housing bubble, particularly in the final quarter of the year,” said Daren Blomquist, senior vice president at ATTOM Data Solutions, the new parent company of RealtyTrac.

Actually, though, the latest foreclosure numbers understate some very good real estate news

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First, the 2016 foreclosure figures wildly overstate the current condition of the real estate marketplace. It’s MUCH better than the numbers suggest,

“A total of 478,857 U.S. properties started the foreclosure process in 2016,” says the company, “down 16 percent from 2015 and down 78 percent from the peak of 2,139,005 foreclosure starts in 2009 to the lowest level since ATTOM began tracking foreclosure starts in 2006.”

Nationwide, says Attom, “55 percent of all loans actively in foreclosure as of the end of 2016 were originated between 2004 and 2008.”


In other words, most of today’s foreclosures are actually rooted in the go-go lending years when no-doc loans, stated income loan applications, and option ARMs were widely marketed by mortgage lenders.

Annual U.S. Foreclosure Filings
Year Foreclosure Filings Annual Change
   2016 933,045 down 13.89 percent
   2015 1,083,572 down 3.0 percent
   2014 1,117,426 down 17.94 percent
2013 1,361,795 down 25.85 percent
2012 2,304,941 down 14.59 percent
2011 2,698,967 down 29.45 percent
2010 3,825,637 down 3.33 percent
2009 3,957,643 up 25.33 percent
2008 3,157,806 up 43.32 percent
2007 2,203,295 up 74.99 percent
2006 1,259,118 up 42.20 percent
2005 885,468 n.a.

 Source: RealtyTrac.com
Chart Copyright 2017 OurBroker.com

Second, fewer foreclosures are not the result of magic. They reflect the very real benefits of the Dodd-Frank mortgage requirements, including the ability-to-repay rule and the qualified mortgage (QM) standards.

Not only has Dodd-Frank been good for borrowers, it has been very good for lenders. According to the FDIC, bank profits reached $45.6 billion in the third quarter, nearly doubt the $23.8 during the third quarter of 2010, just after the passage of Dodd-Frank.

Foreclosures and Mortgage Rates

Investors understand that in a time when economies are troubled and turbulent worldwide, US mortgages are about as risk-free as any financial option. Don’t believe it? Just look at the foreclosure numbers.

Little risk, of course, is one reason mortgage rates have been in a ditch since 2011.

(Photo courtesy of Skylar Smith)

Copyright 2017 OurBroker.com. All rights reserved.

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