Foreclosure Levels And Mortgage Rates At Pandemic-Era Peaks

The U.S. housing market experienced the beginnings of a mortgage servicing sinkhole last month with 23,204 residential properties with foreclosure filings, a 29% increase from the previous month and a 139% surge from one year ago, according to data released by ATTOM, the parent company of RealtyTrac.

What Happened: The new ATTOM data showed one in every 5,922 housing units had a foreclosure filing in January. The states with the highest foreclosure rates were New Jersey (one in every 2,336 housing units with a foreclosure filing), Illinois (one in every 2,740 housing units), Nevada (one in every 3,119 housing units), Michigan (one in every 3,127 housing units) and Ohio (one in every 3,251 housing units).

Detroit recorded the highest foreclosure rates among the major metro areas with one in every 1,547 housing units burdened with a foreclosure filing.

Lenders repossessed 4,784 U.S. properties through completed foreclosures (REOs) in January 2022, up 57% from December and up 235% from January 2021. This marked the seventh consecutive month with an annual increase in completed foreclosures.

"The increased level of foreclosure activity in January wasn't a surprise," said Rick Sharga, executive vice president of RealtyTrac. "Foreclosures typically slow down during the holidays in November and December and pick back up after the first of the year."

Sharga added that January’s numbers “were probably a little more dramatic than usual” because the foreclosure restrictions created by the Consumer Financial Protection Bureau expired at the end of December, thus enabling mortgage servicers to move forward.

"It's very important to keep these numbers in context," Sharga added. "Foreclosure completions are still far below normal levels — less than half as many as in January of 2020 before the pandemic was declared, and about 60% lower than the number of foreclosure completions in 2019. We're likely to continue seeing large year-over-year percentage increases for the rest of this year, but it's also likely that foreclosure activity will remain below historically normal levels until the end of 2022."

See Also: Benzinga Live: Red-Hot Stocks To Beat Inflation

What Else Happened: In other housing market data reporting, Federal Home Loan Mortgage Corp FMCC reported the average for a 30-year loan was 3.69%, up from 3.55% last week. This marks the highest level since Jan. 2, 2020, when rates averaged 3.72%.

“The normalization of the economy continues as mortgage rates jumped to the highest level since the emergence of the pandemic,” said Sam Khater, Freddie Mac’s chief economist. “Rate increases are expected to continue due to a strong labor market and high inflation, which likely will have an adverse impact on homebuyer demand.”

As mortgage rates climbed, mortgage application activity declined. The Mortgage Bankers Association’s (MBA) Market Composite Index, a measure of mortgage loan application volume, dropped by 8.1% on a seasonally adjusted basis for the week ending Feb. 4 from one week earlier. On an unadjusted basis, the index was down 6%.

The seasonally adjusted Purchase Index was down by 10% from the previous week while the unadjusted Purchase Index decreased 3% from the previous week and was 12% lower than the same week one year ago.

The Refinance Index dipped 7% from the previous week and plummeted 52% year-over-year. The refinance share of mortgage activity decreased to 56.2% of total applications from 57.3% in the previous week.

Joel Kan, MBA’s associate vice president of economic and industry forecasting, observed, “The average loan size again hit another record high at $446,000. Activity continues to be dominated by larger loan balances, as inventory remains tight for entry-level buyers.”

Photo: Schluesseldienst / Pixabay