Foreclosures

Foreclosure OverviewForeclosure OverviewForeclosure OverviewForeclosure Overview

Shadow Inventory Shadow Inventory

Paul C. Bishop, Ph.D.Managing Director, Real Estate ResearchSelma LewisSelma LewisEconomist, Research

NATIONAL ASSOCIATION OF REALTORS®NNATIONALATIONAL AASSOCIATIONSSOCIATION OFOF RREALTORSEALTORS®®

March 25, 2010

O tliOutline

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

NATIONAL ASSOCIATION OF REALTORS® Research Division

N b f Di t d LNumber of Distressed Loans900

700

800

900

ds

400

500

600

Th

ou

san

d

100

200

300

Mortgage

0

100

06

/Q1

06

/Q2

06

/Q3

06

/Q4

07/

Q1

07/

Q2

07/

Q3

07/

Q4

08

/Q1

08

/Q2

08

/Q3

08

/Q4

09

/Q1

09

/Q2

09

/Q3

09

/Q4

Mortgage Foreclosures Started

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

P i S b i D li R tPrime vs. Subprime Delinquency Rates


Source: MBA NDS

F l I tForeclosure Inventory


Source: MBA NDS

•California, Florida, Arizona, 2009 Totals California, Florida, Arizona, Illinois account for 50 percent of national total

•These 13 states account for Rank

State Name

Total Properties

with Filings

% Housing Units

1/every X HU (rate)

%Ch from 2008

%Ch from 2007 These 13 states account for

72% of total delinquency filings

•Vermont lowest foreclosure rate and the lowest absolute number

with Filings g Units 2008 2007

-- U.S. 2,824,674 2.21 45 21.21 119.67

1 Nevada 112,097 10.17 10 44.28 225.7a d t e lowest absolute u be of foreclosures, only 143 filing reported, or 0.05% of its housing units.

2 Arizona 163,210 6.12 16 39.6 323.17

3 Florida 516,711 5.93 17 34.1 212.61

4 California 632,573 4.75 21 20.81 153.52

5 Utah 27,140 2.93 34 82.93 264.88

•North Dakota second best, with just 0.13% of its housing units receiving notice

6 Idaho 17,161 2.72 37 101.61 371.46

7 Georgia 106,110 2.68 37 24.46 79.67

8 Michigan 118,302 2.61 38 11.54 35.65

9 Illinois 131 132 2 5 40 31 81 103 91•West Virginia was the third best, South Dakota ranked fourth best

9 Illinois 131,132 2.5 40 31.81 103.91

10 Colorado 50,514 2.37 42 0.23 28.2

11 Oregon 34,121 2.12 47 89.55 303.27

12 Ohio 101,614 2.01 50 -10.53 12.93

M l d 8 8 8


13 Maryland 43,248 1.87 54 33.74 129.08

Source: Realtytrac, Inc.

6.1%U.S. Average 7.7%

4%6.3% 6.9%7.2%

3.5%

2.5%

7.5% 8.7%11 1%

8.3%11.1% 4.8%6.4%

8.3%

12.5%19%

5.9%

3.7%

7.2%

3.5%

4.4% 5.7% 6.7%9.6%

5 8%11.2%9.5%

11.1%

6.1%9.2%

10.4%8.1%

7.3%

6.3%6%

5.9%

13.2%

5.3% 6.2% 7%

5.6%

6.4%7.1%

5.8%

7.8%

6%

9.9%6.8%9.1%

7.7%20.4%

3%

Percent of Seriously Delinquent Mortgages2009 Q4

LowBelow AverageAverage


8.3%Above AverageHighVery High Source: MBA NDS

Prepared by Selma Lewis

12.2%U.S. Average 10%

14.3%6.6%7.2%10.2%

9.6%

4.2%

8.9% 12.2%

10.1%6.8%

9.7%13.5%

12.1%

6.8% 7.5%

10.4%

13.2%9.6%

6.3%14.6% 5%

9.2% 10%6.8%

6.6%

9 1%12.2% 9.2%

11.9%11.3%

15.1%

14.3%

8.1%

7.5%

13.6%

8.3%

9.5%

9.6% 8%

11.6%8.9% 13.2%

9.1%

11.3%

11.8%

9.6% 14.5%

8.6%

10.6%

11.8%

-0.3%

Change in Seriously Delinquent MortgagesQ3 2009 to Q4 2009

DecreaseSmall ChangeBelow Average Change


13.2%Average ChangeAbove Average ChangeLarge Change Source: MBA NDS


90+ days Delinquency Rates Q4 0990+ days Delinquency Rates Q4 09

NATIONAL ASSOCIATION OF REALTORS® Research DivisionSource: Credit reporting agency, TransUnion LLC'sTrend Data database.

90+ days Delinquency Rates Year90+ days Delinquency Rates Year--Year ChangeYear Change

NATIONAL ASSOCIATION OF REALTORS® Research DivisionSource: Credit reporting agency, TransUnion LLC'sTrend Data database.

-14.3%U.S. Average -9.0%

3.7%-5.4%

-9.7%-9.5%

-6.9% -14.7%

-9.1% -25.7%

3.7%

13 2%

-13.2% -3.6%-9.1%23 5%-7.9%

-20.1% 1.3%

-12.7%-2.4%

9.5%

-6.5%-6.9%

-12.7%

-19.3% -7%

-13.2%

54.9%

-19%-10.3%

-23.5%

-15%

-35.4%

1%-17.2%

12.7%-8.8%

-2.3%

-7.2%-1.7%-6.3%

-2.3% -15.6%

-3.6%

-10.6%

7.3% -7.1%

2.8%-14.4%

-5.4%

-19%

Change in Foreclosure StartsQ3 2009 to Q4 2009

-35.4% - -26.6%-26.5% - -14.7%-14.6% - -2.7%


-14.9%-2.6% - 9.2%9.3% - 21.2%21.3% - 54.9% Source: MBA NDS


Oth T d f D li iOther Trends for Delinquencies• Ratio of foreclosures completed to loans in the process of foreclosure in the previous

month shows the widening gap in the foreclosure completion rate 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 f P bl C i G d S• Pool of Problem Loans Continues to Grow and 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 d t i i i g th high t t f i l d li t l


• FHA product is experiencing the highest rate of new seriously delinquent loans. ▫ 9.4% in January, but origination down 10% over December

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


Source: LPS Mortgage Monitor

Oth T d f R ll R tOther Trends for Roll Rates• Early stage roll rates increased most dramatically in the non-Early stage roll rates increased most dramatically in the 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


27.8%National Distressed Sales 4 Month Average 32.2%National Distressed Sales 4 Month Average 32.2%

33.4% 41.4%25.9% 10.2%

26%

57 1%

57.1% 22.4%16.3%

NA

NA

NA NA

NA

54.3%78.8%

28.7%34.2%

15.6%

41%

16.2%28.2%

33.9%

57.1%

31 1%

27.2%20.5%

18.9%NA

NA

NA

NA

12.8%

18%

57.8%

28.7%

33%10.7%

30.5%23.4%24.5%

20.7%31.1%

23.5%

NA

20.2%51.7%

15%47.5%

31.7%NA

Share of Distressed Sales4 month average

Below AverageAverage NA


NAAbove AverageHigh Above AverageInsufficient Response Rate Source: NAR RCI


17%National Foreclosure Sales 4 Month Average 21.4%National Foreclosure Sales 4 Month Average 21.4%

20% 28%

6%18%

15%

37%3%

15%NA

NA

NA NA

NA

33%52%

17%18%

14%

22%

10% 12%37%

18%

23%33% 21%

10%13%NA

NA

NA

NA

4%36% 9%

14% 25%

42%32%

23%

18%19%

19%23%

12%

15% 7%

42%23%

27%Share of Foreclosure Sales4 th

NA

4 month averageLowBelow AverageAverageAbove AverageHigh

NA


Source: NAR RCIPrepared by Selma Lewis

NAHighVery HighInsufficient Response Rate

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

% of prime loans in foreclosure or REO0.4% - 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 MetrosLender-Owner Properties in 100 Largest MetrosDecember 2009December 2009

Legendg0.55 - 2.222.23 - 5.465.47 - 8.698.70 - 11.9211.93 - 17.99


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

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

Legend3 38 1 28-3.38 - -1.28

-1.28 - -0.76-0.76 - -0.25-0.25 - 0.250.25 - 0.760.76 - 1.23


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

C t M tg g Sit tiCurrent Mortgage SituationRoll Rates Roll Rates from

% of loans in Q42009

# of loans in Q42009

from LPS (average)

LPS (most recent4 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 3.63% ~1,971,000 22.5% 27.5%y

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


Serviced ~54,300,000

Sh d I t E ti tShadow Inventory EstimateExisting Foreclosure Inventory 2,487,435

in 30 days 552,884in 60 days 83,998in 90 days 48,469

in 120 days 24,034din 150 days 24,034

in 180 days to 360 days 24,034 per monthTotal Additional Foreclosures 901,659

TOTAL Foreclosures + 60 days 3,124,318l d h kLess SDQ already on the market

(estimated at 24% of SDQ loans) -749,836Less Modifications

(60% of trials in February) -602,341REO 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 defaultstage of default

2. Making Home Affordable Program and other mitigation programsg p g

3. Future unemployment / Loss of Income4. Strategic defaults5. Rate of REOs getting released6. Upcoming wave of Option ARM resets


1 R ll R t1. Roll Rates

• Rolls into foreclosure are hitting new all time • 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 M ki g H Aff d bl2. Making Home Affordable• Number of Trial Period Plan Offers Extended to Borrowers (Cumulative) = 1 354 350Number of Trial Period Plan Offers Extended to Borrowers (Cumulative) 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:


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

35.5%U.S. Average 29%

32.2%36.6% 35.8%

26.5% 20.6%

20.5%

27.5% 32.3%

28%

26 9%

26.9% 27.7%46.5%41 9%

32.9%31.2%

28.9%

30.2%

37.4%

20.6%

20.6%27%20.2%

37%

18.4%36.1%

26.9%

15.7% 26.2%43%

41.9%

31.9%36.6%

29.7%38.8%

28.9%21.7%

15.2%

29.1% 37%

20.5%

30.7%22.6%

17.7%

27.3%

23.3%31.9%

20.9%

21.7%21.8%

21.3%

23.4%

Share of Seriously DelinquentMortgages in HAMP

LowBelow Average


34.4%AverageAbove AverageHigh Source: MBA NDS, Feb HAMP


2 M ki g H Aff d bl2. Making Home Affordable


2 M ki g H Aff d bl2. Making Home Affordable

12 M h R d f l R b M difi i T12-Month Re-default Rate by Modification Type


3 U l t/L f I3. Unemployment/Loss of Income


4 St t gi D f lt4. Strategic Defaults• 1380 square foot house in Salinas, California1380 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 • House now only worth $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• Would save ~ $340,000 by walking away

• 26% of existing defaults are strategicBorrowers with higher credit scores are 50% more likely to • 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


10%of the value of the house

16%16%N/A

National negative equity share is 23.8%National negative equity share is 23.8%

7%7% 8%8%16%16% 17%17%23%23%

6%6%15%15%38%38%

38%38% 19%19%16%16%

12%12%17%17%N/AN/A

N/AN/AN/AN/A

35%35%70%70% 9%9%

20%20%11%11%

21%21%

9%9%

%16%

8%8%

21%21%

38%38%

20%20%

24%24%11%11% 23%23%

16%16%12%12%

14%14%

17%17%N/AN/A

N/AN/A

12%12%51%51% 6%6%

11%11%

9%9%

16%16%

28%28%

9%9%

13%13%

10%10%14%14%

24%24%

13%13%

12%12%

9%9% 28%28%

48%48%

N/AN/A

N/AN/A

10%10%

Negative Equity ShareBelow AverageAverageAbove AverageHi h Ab A


10%10%8%8%High Above Average

Very HighNo Data

5 REO t ti t5. REO saturation rate

M t lit A%Change

Y/YREO

S t ti M t lit A%Change

Y/YREO

S t tiMetropolitan Area Y/Y SaturationRiverside-San Bernardino-Ontario, CA -12.2% 50.0%Orlando, FL -20.3% 41.6%Dallas-Fort Worth-Arlington,

Metropolitan Area Y/Y SaturationBirmingham-Hoover, AL 6.6% 29.3%Tampa-St.Petersburg-Clearwater, FL -7.5% 24.2%San Jose-Sunnyvale-Santa

TX 3.0% 39.8%Sacramento--Arden-Arcade--Roseville, CA 0.4% 37.5%Memphis, TN-MS-AR 20.6% 36.8%Houston-Baytown-Sugar

Clara, CA 11.4% 23.2%Denver-Aurora, CO 11.2% 22.9%New Haven-Milford, CT -1.4% 19.7%Seattle-Tacoma-Bellevue, WA -6.3% 18.6%Providence-New Bedford-Fall y g

Land, TX 5.6% 36.5%Minneapolis-St. Paul-Bloomington, MN-WI -3.7% 34.7%Cleveland-Elyria-Mentor, OH 24.7% 33.5%Los Angeles-Long Beach-

River, RI-MA -1.8% 15.4%Baltimore-Towson, MD -6.2% 15.0%Louisville, KY-IN 4.9% 14.3%Virginia Beach-Norfolk-Newport News, VA-NC -4.8% 14.1%Los Angeles Long Beach

Santa Ana, CA -0.5% 33.1%San Francisco-Oakland-Fremont, CA 13.2% 30.0%Jacksonville, FL -12.1% 29.8%Columbus OH 4 7% 29 6%

News, VA NC 4.8% 14.1%New Orleans-Metairie-Kenner, LA 1.9% 13.4%Boston-Cambridge-Quincy, MA-NH -1.0% 11.1%Oklahoma City OK 9 7% 9 1%


Columbus, OH 4.7% 29.6%Atlanta-Sandy Springs-Marietta, GA -3.4% 29.4%

Oklahoma City, OK 9.7% 9.1%Honolulu, HI 0.4% 8.4%Pittsburgh, PA 4.8% 8.3%

6 M thl M tg g R t R t6. Monthly Mortgage Rate Resets


Questions

Selma LewisEconomist ResearchEconomist, ResearchNAR – Washington, DC

[email protected]

www.realtor.org/research

www.realtor.org/righttools

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