Foreclosure starts outnumbered completions by nearly tenfold in May

Foreclosure filings inched up last month, as activity slowly climbs toward pre-pandemic levels, but completions remain low relative to starts, according to industry data provider Attom.

The total number of U.S. properties with foreclosure filings, such as default notices, scheduled auctions or bank repossessions, totaled 30,881 in May, an increase of 1% from April. Compared to a year ago when a COVID-related moratorium on foreclosures was still in place, May’s total came in 185% higher. 

In April, filings had fallen by 8% on a monthly basis. Earlier that month, the Federal Housing Finance Agency had issued a directive suspending foreclosures on borrowers who had applied for federal relief through the Homeowner Assistance Fund.  

“While there’s some volatility in the monthly numbers, foreclosure activity overall is continuing its slow, steady climb back to normal after two years of government intervention led to historically low levels of defaults,” said Rick Sharga, executive vice president of market intelligence at Attom, in a press release.

One in every 4,549 properties had a foreclosure filing in May, Attom’s data showed. Illinois led the country on a per-housing-unit basis, with one in 2,000 homes in foreclosure proceedings. Following Illinois was New Jersey, at one in 2,346 units and Delaware, where one in every 2,426 properties was in foreclosure.

While filings registered an uptick, the number of properties entering foreclosure edged down by 1% to 22,099 from 22,286 in April, but new starts were also 274% higher than in May 2021. The most highly populated states of Florida, California and Texas led the country in foreclosure starts with 2,483, 2,238 and 2,019, respectively. 

As starts dropped, property repossessions from foreclosure completions increased by 1%, but still came in lower than some expected, Sharga said.

“It’s interesting that there were almost ten times more foreclosure starts than foreclosure completions,” Sharga said. “This suggests that financially distressed borrowers may be finding ways to avoid losing their home to a foreclosure sale.” 

Sharga had previously pointed to the record surge in home equity values potentially providing distressed borrowers a solution, allowing them to sell their properties before they went up for auction. 

The number of monthly repossessions resulting from foreclosure rose to 2,857 from 2,830 in April. On a year-over-year basis, they surged 117%. Midwestern states saw the highest number of repossessed properties in May, with Illinois leading the nation at 350, followed by Michigan with 249 and Pennsylvania at 226.

While the pace of foreclosure activity is increasing, it has not caused widespread concern. But recent economic news has researchers warning about potential headwinds in the months ahead.

"With inflation now at a 41-year high, and runaway prices on necessities like food and gasoline, we may see foreclosure activity ramp up a little faster than most forecasts suggest," Sharga said.