Foreclosures

Foreclosure Overview

Shadow Inventory

Selma Lewis
Paul C. Bishop, Ph.D.
Managing Director, Real Estate Research
Economist, Research
NATIONAL ASSOCIATION OFOF REALTORS®
NATIONAL ASSOCIATION REALTORS®

March 25, 2010

Outline
O tli
 National trends
 Trends by state and by county
 Roll rates trends
 RCI Distressed Sales by state
 National shadow inventory
 Variables impacting shadow inventory

NATIONAL ASSOCIATION OF REALTORS® Research Division

Number f Distressed L
N b of Di t d Loans
900

800

700
ds
Thousand

600

500

400

300

200

100 Mortgage
Foreclosures
0 Started
06/Q1
06/Q2

08/Q1

09/Q1
09/Q2
06/Q3
06/Q4

07/Q3
07/Q4

08/Q3
08/Q4

09/Q3
09/Q4
07/Q1
07/Q2

08/Q2

Series 2
200
200

200
200
200
200

200
200

200
200

200
200

200
200
200

200

Source: Counts based on Extrapolated MBA NDS Q4. 80% Factor for FC and DQ


Prime vs. S b i
Pi Subprime D li
Delinquency R t
Rates

Source: MBA NDS


Foreclosure Inventory
F l I t

Source: MBA NDS


2009 Totals •California, Florida, Arizona,
California,
Illinois account for 50 percent
of national total
Total % %Ch %Ch
State 1/every X
Rank Properties Housin from from
Name HU (rate) •These 13 states account for
These
with Filings g Units 2008 2007
72% of total delinquency filings
-- U.S. 2,824,674 2.21 45 21.21 119.67
•Vermont lowest foreclosure rate
1 Nevada 112,097 10.17 10 44.28 225.7
a d the
and t e lowest absolute number
u be
2 Arizona 163,210 6.12 16 39.6 323.17 of foreclosures, only 143 filing
3 Florida 516,711 5.93 17 34.1 212.61 reported, or 0.05% of its housing
4 California 632,573 4.75 21 20.81 153.52 units.
5 Utah 27,140 2.93 34 82.93 264.88
6 Idaho 17,161 2.72 37 101.61 371.46 •North Dakota second best, with
7 Georgia 106,110 2.68 37 24.46 79.67 just 0.13% of its housing units
8 Michigan 118,302 2.61 38 11.54 35.65 receiving notice
9 Illinois 131,132
131 132 2.5
25 40 31.81
31 81 103.91
103 91
10 Colorado 50,514 2.37 42 0.23 28.2 •West Virginia was the third best,
11 Oregon 34,121 2.12 47 89.55 303.27 South Dakota ranked fourth best
12 Ohio 101,614 2.01 50 -10.53 12.93
13 M l d
Maryland 43,248
8 1.87
8 54 33.74 129.088
Source: Realtytrac, Inc.


U.S. Average 7.7%
6.1%
4% 8.3%
2.5%
6.3% 6.9% 11.1% 4.8%6.4%
7.2%
3.5% 7.5% 8.7% 8.3%
3.7% 11.1%
11 1% 8.1%
5.7% 6.7% 10.4%
19% 4.4%
9.6% 9.2%7.3%
7.2% 11.2% 9.5%
12.5% 5.9% 6.1%
5.3% 6.2% 5.8%
5 8%
7%
6.4%
7.1%
13.2% 6%
6.3% 5.6% 7.8%
9.1% 6.8% 9.9%

6% 7.7%
20.4%
Percent of Seriously Delinquent Mortgages
2009 Q4
Low
Below Average
Average 3%
Above Average
High 8.3%
Very High Source: MBA NDS
Prepared by Selma Lewis


U.S. Average 10%
12.2%
14.3% 10.1%
4.2% 12.1%
10.2% 6.6% 6.8% 13.5%
7.2%
9.6% 8.9% 12.2% 9.7%
13.2% 6.8% 15.1%
9.2% 10% 11.3%
10.4% 6.3%
6.6% 11.9%14.3%
14.6% 12.2% 5%
6.8% 7.5% 9.2%
8.3% 9.6% 9.1%
9 1%
8%
13.2%
8.9%
8.1% 9.5%
13.6% 11.6% 11.3%
9.6%10.6%
14.5%
11.8% 11.8%
8.6%
Change in Seriously Delinquent Mortgages
Q3 2009 to Q4 2009
Decrease
Small Change
Below Average Change -0.3%
Average Change
13.2%
Above Average Change
Large Change Source: MBA NDS


90+ days Delinquency Rates Q4 09

Source: Credit reporting agency, TransUnion LLC'sTrend Data database.

90+ days Delinquency Rates Year-Year Change
Year-

Source: Credit reporting agency, TransUnion LLC'sTrend Data database.

U.S. Average -9.0%
-14.3%
3.7% 3.7%
-6.9% -14.7%
-5.4% -13.2% -3.6%
-9.7% -9.1%
-9.5%
9.5% -9.1% -25.7%
13 2%
-13.2% -23.5%
23 5%
-7.9%
-6.5% -12.7%-19%
-20.1% 1.3%
-6.9% -10.3%
-2.4% -19.3%54.9%
-12.7%
12.7% -7%
-35.4% -8.8% -7.2% -15.6%
-2.3%
-1.7%
-6.3%
-17.2% -2.3%
-15% 1% -3.6%
-5.4%7.3% -7.1%
-10.6% 2.8%
-14.4%
Change in Foreclosure Starts
Q3 2009 to Q4 2009
-35.4% - -26.6%
-26.5% - -14.7%
-14.6% - -2.7% -19%
-2.6% - 9.2%
9.3% - 21.2% -14.9%
21.3% - 54.9% Source: MBA NDS


Other Trends for Delinquencies
Oth T d f D li i
• Ratio of foreclosures completed to loans in the process of foreclosure in the previous
month shows the widening gap in the foreclosure completion rate
▫ In 2007, 50% of the previous month’s loans in process of foreclosure. Now is18%.
▫ The number of foreclosures completed on prime loans remained basically flat and the
number of completed subprime foreclosures fell 42%

• P l of P bl
Pool f Problem Loans Continues to G
C i Grow and S
d Stagnate
▫ Days in foreclosure process went from 260 days in 2008 to 410 days in Jan 2010

• Largest increase in delinquency among borrowers with credit score >680

• 30% of foreclosures are homes in the top tier of local home values
▫ Top-tier homes make up twice the proportion of foreclosures than 3 years ago. Reasons:
High delinquency rates in Prime, Alt-A and Option ARM mortgage products and declining
cure rates

• Last year worst deterioration among the three prime categories (non-agency, agency
and jumbo prime loans)
▫ increased unemployment, jumbo financing was very tight in 2009

• FHA product i experiencing th high t rate of new seriously d li
d t is i i g the highest t f i l delinquent l
t loans.
▫ 9.4% in January, but origination down 10% over December


Roll Rates
R ll R t – 2005 t present
to t

Source: LPS Mortgage Monitor


Other T d f R ll Rates
Oth Trends for Roll R t
• Early stage roll rates increased most dramatically in the non-
non
agency Jumbo prime product followed by non-agency conforming
prime

• However, compared to January 2008, agency prime has
experienced the greatest deterioration in early stage rolls.

• 30% of foreclosures are still pre-sale after 12 months, twice the
level of one year prior. Slight decline in October, due as much to
REO Outs as to Cures or Voluntary Payoffs.
y y

• REO leaving the balance sheet was declining in the middle of 2009
but it picked up again in September , and is around 26%
p p g p


Confidence Index
Foreclosures and Short Sales


National Distressed Sales 4 Month Average 32.2%
27.8%
26%
NA NA NA
33.4% 41.4% 57.1%
22.4%
NA 25.9%
NA 10.2%16.3%
57.1%
57 1% 18.9%
NA NA
15.6% 16.2%20.5%
78.8% NA 28.2%
34.2% 33.9% 41% 27.2%
54.3% 28.7% NA 31 1%
18% 30.5% 31.1%
20.7%
23.4%
24.5%
57.8% 10.7%
12.8% 33% 23.5%
31.7% 51.7%
NA
20.2% 15%
47.5%

Share of Distressed Sales
4 month average
Below Average
Average NA
Above Average
High Above Average NA
Insufficient Response Rate Source: NAR RCI


National Foreclosure Sales 4 Month Average 21.4%
17%
15%
NA NA NA
20% 28% 37% 15%
NA NA 18% 6% 3%
NA 37% 13% NA
10% 12% 10%
52% NA 18%
18% 22% 33% 21%
33% 17% NA 23%
14% 25% 19%
18%
19%
36% 9%
4% 32% 12%
23% 42%
NA
15% 7%
Share of Foreclosure Sales 27%
4 month average
th
Low
Below Average
Average
Above Average NA
High
Very High NA
Insufficient Response Rate
Source: NAR RCI


National Rate of Prime Loans in
Foreclosure or REO is 2.58%
2 58%

% of prime loans in foreclosure or REO
0.4% - 1.2%
1.2% - 2.8%
2.8% - 4.5%
4.5% - 6.2%
6.2% - 12.8% Source: Loanperformance.com


Lender-Owner Properties in 100 Largest Metros
December 2009

Legend
g
0.55 - 2.22
2.23 - 5.46
5.47 - 8.69
8.70 - 11.92
11.93 - 17.99

Average REOs per 1,000 mortgageable properties for the 100 larest metropolitan areas: 4.27
Average REOs per 1,000 mortgageable properties for the United States: 3.29


Change in Lender-Owned Properties in Largest 100 Metros
September 2009 to December 2009

Legend
-3.38 - -1.28
3 38 1 28
-1.28 - -0.76
-0.76 - -0.25
-0.25 - 0.25
0.25 - 0.76
0.76 - 1.23

Average change in REO property rate per 1,000 mortgageable properties for the 100 larest metropolitan areas: -0.05
Average change in REO property rate per 1,000 mortgageable properties for the United States: -0.02


Current Mortgage Sit ti
C t M tg g Situation
Roll Rates Roll Rates from
% of loans in Q4 # of loans in Q4 from LPS LPS (most recent
2009 2009 (average) 4 month av)
Foreclosure
Inventory (end
of Q) 4.58% ~2,487,000 100% 100%

90 days 5.09% ~2,764,000 30.0% 20.0%

60 days 1.73% ~939,000 36.8% 44.7%

30 days
y 3.63% ~1,971,000 22.5% 27.5%

Current 89.55% ~48,635,000 1.5% 1.8%
Total Loans
Serviced ~54,300,000
54 300 000


Shadow I
Sh d Inventory E ti t
t Estimate
Existing Foreclosure Inventory 2,487,435
in 30 days 552,884
in 60 days 83,998
in 90 days 48,469
in 120 days 24,034
in 150 d
days 24,034
in 180 days to 360 days 24,034 per month
Total Additional Foreclosures 901,659
TOTAL Foreclosures + 60 days 3,124,318
Less SDQ already on the market
l d h k
(estimated at 24% of SDQ loans) -749,836
Less Modifications
(60% of trials in February) -602,341
REO not on the market 645,920
Current Shadow Inventory 2,418,060


Shadow Inventory estimates
y
(1.7 -7 Mill) depend on…
1. On roll rates - % of loans rolling into next
stage of default
2. Making Home Affordable Program and other
mitigation programs
g p g
3. Future unemployment / Loss of Income
4. Strategic defaults
5. Rate of REOs getting released
6. Upcoming wave of Option ARM resets


1. Roll Rates
1 R ll R t
• Rolls into foreclosure are hitting new all time
lows

• Rate of seriously delinquent deterioration
remains close to record highs.
g

• If we are to use different roll rates in our
estimate, shadow inventory could range from
1.2 million to 2.0 million.


2. Making Home Aff d bl
2 M ki g H Affordable
• Number of Trial Period Plan Offers Extended to Borrowers (Cumulative) = 1,354,350
1 354 350
• All Active Modifications (Trial and Permanent) = 1,003,902
• 89% of eligible mortgage debt outstanding covered by HAMP participating servicers.
• Median saving 36% of before-modification payment; median savings is more than $500
• Borrowers are eligible to earn up to $1,000 to be applied to their outstanding balance.


For HAMP reports:
p
http://www.makinghomeaffordable.gov/
A complete list of HAMP activity for all MSAs is available at:
http://makinghomeaffordable.gov/docs/MSA%20Data%20February.pdf

U.S. Average 29%
35.5%
28%
32.2% 20.5%
36.6% 35.8% 26.9% 27.7%
26.5% 27.5% 46.5%
20.6% 32.3%
26.9%
26 9% 41.9%
41 9%
30.2%
20.2% 27% 31.9%
31.2% 20.6%
18.4% 43%36.6%
37.4% 36.1%15.7%
32.9% 28.9% 26.2%
21.7% 29.1% 37%
17.7%
30.7%
22.6%
38.8% 15.2%
29.7% 20.5% 27.3%
21.8%21.7% 31.9%
23.3% 21.3%
20.9%
Share of Seriously Delinquent
Mortgages in HAMP
Low
Below Average 23.4%
Average
34.4%
Above Average
High Source: MBA NDS, Feb HAMP


12-Month Re-default R
12 M h R d f l Rate by M difi i T
b Modification Type


3. Unemployment/Loss of I
3 U l t/L f Income


4. Strategic Defaults
4 St t gi D f lt
• 1380 square foot house in Salinas, California
• $585,000 in January of 2006
▫ $4300 - 30-year fixed, 0 down, 6.5% APR
• House now only worth $187,000
$187 000
▫ with a 5% down = total monthly payment of <$1200 per month –
or rent a similar house for about $1000
• Would save ~ $340,000 by walking away
$340 000

• 26% of existing defaults are strategic
• Borrowers with higher credit scores are 50% more likely to
strategically default
• No household would default if the equity shortfall is less than
10%of the value of the house


National negative equity share is 23.8%
16%
N/A
7% 8% N/A
16% 17% 38%
23% 19%
N/A 15% 6% 16%
N/A 38% 12% 17%
9% 8% 16%
70% 9%
20% 23% 14%
21% 21% 11%
35% 20% N/A
11% 16%
% 24%
9%
10%
14%
51% 6%
12% 13% 13%
N/A 9% 28%
12%
N/A
48%
Negative Equity Share
Below Average
Average
Above Average
High Above A
Hi h Ab Average
10%
Very High
8%
No Data


5.
5 REO saturation rate
t ti t
%Change REO %Change REO
Metropolitan A
M t lit Area Y/Y Saturation
S t ti Metropolitan A
M t lit Area Y/Y Saturation
S t ti
Riverside-San Bernardino- Birmingham-Hoover, AL 6.6% 29.3%
Ontario, CA -12.2% 50.0% Tampa-St.Petersburg-
Orlando, FL -20.3% 41.6% Clearwater, FL -7.5% 24.2%
Dallas-Fort Worth-Arlington, San Jose-Sunnyvale-Santa
TX 3.0% 39.8% Clara, CA 11.4% 23.2%
Sacramento--Arden-Arcade-- Denver-Aurora, CO 11.2% 22.9%
Roseville, CA 0.4% 37.5% New Haven-Milford, CT -1.4% 19.7%
Memphis, TN-MS-AR 20.6% 36.8% Seattle-Tacoma-Bellevue, WA -6.3% 18.6%
y
Houston-Baytown-Sugarg Providence-New Bedford-Fall
Land, TX 5.6% 36.5% River, RI-MA -1.8% 15.4%
Minneapolis-St. Paul- Baltimore-Towson, MD -6.2% 15.0%
Bloomington, MN-WI -3.7% 34.7% Louisville, KY-IN 4.9% 14.3%
Cleveland-Elyria-Mentor, OH 24.7% 33.5% Virginia Beach-Norfolk-Newport
Los Angeles-Long Beach-
Angeles Long Beach News, VA-NC
VA NC -4.8%
4.8% 14.1%
Santa Ana, CA -0.5% 33.1% New Orleans-Metairie-Kenner,
San Francisco-Oakland- LA 1.9% 13.4%
Fremont, CA 13.2% 30.0% Boston-Cambridge-Quincy, MA-
Jacksonville, FL -12.1% 29.8% NH -1.0% 11.1%
Columbus,
Columbus OH 4.7%
4 7% 29.6%
29 6% Oklahoma City OK
City, 9.7%
9 7% 9.1%
9 1%
Atlanta-Sandy Springs- Honolulu, HI 0.4% 8.4%
Marietta, GA -3.4% 29.4% Pittsburgh, PA 4.8% 8.3%


6. M thl Mortgage Rate Resets
6 Monthly M tg g R t R t


Questions
Selma Lewis
Economist,
Economist Research
NAR – Washington, DC
202-383-1078
slewis@realtors.org
www.realtor.org/research
www.realtor.org/righttools

We’re on Facebook “NAR Research”


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