The most recent report on foreclosures in the Bay State from The Warren Group, publisher of Banker & Tradesman, is more of the same: foreclosure petitions are up for the 16th straight month.
Petitions in June year-over-year were up across the state, with the exception of Dukes and Nantucket counties, where the monthly numbers were too small to be statistically significant. Year-to-date, only Dukes was spared, with 10 petitions this year compared to 15 last year. Nantucket County saw the biggest year-to-date jump with a 600 percent increase in petitions compared with the first six months of 2014.
Completed foreclosures were also up in June, though by a less-wide margin. Nantucket took the top prize again with a 100 percent jump (though to put that in perspective, the county had two completed foreclosures in the first half of 2014 and four in 2015). Coming in a close second was Hampden County with a 95 percent increase (124 in 2014 and 243 in 2015).
Petitions have been on the rise for nearly a year and a half, causing concern in the media and unease in the public that another foreclosure crisis is on the horizon. There are a number of reasons for the recent spike – and no end to it in sight – but industry experts say there’s no need to panic.
Several significant court cases regarding foreclosures were resolved in 2012 and 2013. Many lenders during that time pushed the pause button on foreclosures while the cases were resolved and the outcomes analyzed. Massachusetts in particular had – and continues to have – quite a bit of foreclosure legislation, causing an even greater slowdown in local foreclosure activity.
In the aftermath, smaller lenders were able to quickly and nimbly address the new requirements, while larger lenders took some time to take hard look at their databases and in some cases build custom software to address troubled loans. The building of that software took time, as did its application; now that it is in place, larger lenders are beginning to address loans that should have been indentified a year or 18 months ago.
So while the percentages continue to rise, it is in part attributable to artificially suppressed numbers in 2013 and 2014 while lenders resolved both their databases and their foreclosure processes. A significant portion of the completed foreclosures we’re seeing are on loans that have been in default for years – they are not a true reflection of current default rates, but are rather a reflection of long-delayed action being taken. Estimates for a return to normal (that is, a more accurate gauge of default rates) range from a year to 18 months.
In truth the spike in petitions and deeds is evidence that the housing market is returning to normal. Clearing out inventory that has clogged the system for the past several years returns that inventory to the market at a time when home sales are spiking and prices are climbing, providing a needed source of (hopefully) affordable homes for first-time buyers.
