Fewer borrowers started down the road that could lead them to lose homes through the traditional default process in February than in January. However, compared to numbers from the same time last year, levels for both this category and completions rose markedly.
After 21 consecutive monthly increases, foreclosure filings (notices of default, scheduled auctions or repossessions by banks) dropped 3% to 30,528 from January, but were still up 18% from a year earlier, according to
Completions also dipped month-over-month by 2%, dropping to 3,831 from 3,896, but surged by 45% compared to the same month a year earlier, suggesting the lifting in pandemic-related restrictions over time has allowed more of the older loans that have been in forbearance or the foreclosure pipeline to complete the process than 12 months ago.
While cautious about reading too much into monthly trends that could be seasonal, especially given February's shorter day count, Attom CEO Rob Barber pointed out that a growing number of indicators show foreclosure activity leveling off a little in recent months.
"Foreclosure case numbers have remained up year over year but they have started to stabilize month to month, even showing signs of declining," Barber said. "That likely has flowed from the single-family home price spikes during and since the pandemic, which have given more homeowners options to avoid foreclosure."
Players in the distressed housing market said they've seen similar trends.
"Based on the strength of the equity positions of most homeowners today, the probability of a foreclosure wave continues to be low for the near future," said Rich Kruse, managing partner at auction house and real-estate brokerage Gryphon USA.
Though there are some exceptions, home equity has been bearing up despite
"Despite a decline in the second half of last year as the market boom stalled, the national full-year median home price still was up 29% from 2020 to 2022," Barber noted.
Some owners have been able to refinance or modify their loans due to the availability of equity, although higher rates have made this more challenging. The other option is to sell their homes outside of foreclosure, which Kruse said also is happening. Such options may be preferable to foreclosure as they leave credit records in better shape and could leave consumers with some money after the sale, depending on whether the transaction satisfies the borrower's debt obligation.
"A lot of people that would be in foreclosure auction or default scenarios have a lot of equity these days, so they can sell," Kruse said, noting that this has been "a major factor" in why distressed sales have remained relatively low.
"I do see equity positions and buyer interest decreasing, however not to a level that significantly inverts supply to demand today," he added.
Barber said Attom doesn't have data on how many distressed borrowers have been able to stave off foreclosure due to their equity buffers, but it does have numbers showing relatively few or 2.9% had loans that exceed the values of their homes in the fourth quarter of last year.
"The scenario of almost all homeowners having at least a little equity in their properties and so few sitting in seriously underwater territory boosts chances that mortgage payers can work out some kind of deal to avoid foreclosure or sell," Barber said.
