July Foreclosures Up 15% From June: Start Of A New Trend?

ATTOM Data Solutions recently released its U.S. Foreclosure Market Report for July, and there were 31,929 U.S. properties with foreclosure filings default notices, scheduled auctions, or bank repossessions. This figure was 15% higher than June's number.

Delaware, Nevada and Utah were the states with the highest foreclosure filing rates. New Jersey and Illinois were the next two states with the most. However, California, Florida, Texas, Illinois and New York had the most foreclosure starts.

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A foreclosure filing occurs when a lender files a lawsuit in court to win the right to sell the mortgaged property at auction. A foreclosure start is when the lender takes action to recover the amount owed on the defaulted loan by sending a notice of default to the borrower, accelerating the loan, or calling it due.

Foreclosure completion numbers also increased 14% from June as lenders repossessed 3,282 U.S. properties in July. The states with the most completed foreclosures were New York, California, Illinois, Pennsylvania and Michigan.

The interesting question is, with all the equity increases in real estate over the last three years, why couldn't the owners sell the home to avoid losing it to foreclosure? The answer is complicated. Sometimes it's due to mental illness, drug or alcohol addiction, a bad divorce where spouses won't cooperate, or just waiting too long to act. Homes are not selling as quickly as they did a few years ago due to the higher interest rates and home prices.

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The Consumer Financial Protection Bureau has proposed some rules to require loan servicers to help borrowers before foreclosing, reduce paperwork requirements and improve communications with the homeowner. Options include temporarily pausing payments or extending the loan term to lower monthly payments. If the borrower requests help, the loan servicer will be mandated to help them before initiating a foreclosure.

Is the upswing in foreclosures the start of a new trend or just a one-month phenomenon? Although the numbers jumped from June to July, there was only a 0.2% increase year-over-year. This might suggest it's just a one-month quirk. With the significant amount of equity in American homes, any interest rate cuts or price declines should make it easier for people to sell their homes – assuming they really want to.

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