This report came out a few weeks ago about current foreclosure data, showing that month-over-month foreclosures are up 34% and year-over-year they are up 28%. Those are big numbers – there’s no question that it’s a big deal.
3 Phases in the Foreclosure Process
A few things that are important about these numbers on the report. There are 3 phases to the foreclosure process. In most cases, a person needs to be behind on their mortgage payment for at least 90 days before the mortgage company will even start a foreclosure. So, you could be behind on payments by a few months and not even reported in these numbers.
Then, the process looks like this:
- Initial Notice of Default: This is when the bank officially says that you are in default and the problem needs to be fixed.
- Notice of Sale: Usually, another 90 days pass before moving to step 2. At this point, the bank says that the only other option is to sell the house. There isn’t a court proceeding, they simply go through the warning steps.
- Bank Repossession: If you haven’t caught up on payments after both 90-day periods, then they will auction the house and a private party will buy it at this point. Or, the bank takes back the house.
This report looks at all of this data. Anything that has moved through any of these 3 stages will be reported in this quarterly report.
Foreclosure Data Since 2005
One thing that is good to understand about this report is that the data goes back to 2005, which is before all the madness that happened in 2008. When you are looking at the most recent numbers, you can see a line down which was a moratorium – because it was against the law to foreclose on a property (although I’m unclear why the report doesn’t show at zero at this point).
It dropped down, and you can see the numbers coming back up again. Think about the things that we’ve been through: we made it through the end of the time during COVID when you could stop making mortgage payments. So, everyone had to start making their payments once again. That didn’t cause a big uptick.
Now we have about a year where banks can foreclose again, and we can see that the numbers are going up (which is expected). So, we are probably starting to see the first of these repossessions happening.
What Does It Mean for the Current Market?
From a historical perspective: yes, we are on the rise. But we aren’t even to the point where we were in 2005.
We’ll see what happens. It’s something that is worth keeping our eyes on.
Currently, we have such low inventory and many homeowners have so much equity. So, there are going to be many of these people that do get into trouble, but they have enough equity where they can actually sell the house.
If you are a real estate agent or working in the industry, then there are plenty of opportunities to help homeowners who are getting in trouble with their payments. There are always options available, and we can offer the assistance that they need.