Will there be a wave of foreclosures now that foreclosure moratoriums have been lifted? Experts say probably not -- but there may be a steady uptick in activity as we close out the year.
According to a new report from ATTOM Data Solutions, foreclosure filings fell 4% in July but were up 40% compared to the year prior.
That was before the government’s national foreclosure ban expired, though, when only certain foreclosures (largely homes that were already vacant or abandoned) were allowed. Now that the ban is over, the majority of delinquent homeowners can be foreclosed on -- that is, as long as they’re not on a forbearance plan and their servicer follows the myriad of loss mitigation rules set out by the Consumer Financial Protection Bureau (CFPB).
Due to these protections, the “wave” of foreclosures that many previously predicted may be more of a reliable flow.
Here’s how Rick Sharga, executive vice president of foreclosure platform RealtyTrac, put it: "The end of the government’s moratorium won’t result in millions of foreclosures, but we’re likely to see a steady increase in default activity for the balance of the year. Much of the foreclosure volume will come from the reinstatement of foreclosure proceedings on properties that had already been in default prior to the pandemic and new foreclosure activity on vacant and abandoned properties.”
Where we may see more foreclosure filings
Distressed properties are a popular option for investors -- and though a wave of them may not be in the cards, a steady trickle is still an improvement, particularly in this inventory-strapped market.
To get a feel for where investors may find more of these distressed properties, a look at ATTOM’s July data can help. According to the numbers, 23 states saw increases in foreclosure starts. Washington, D.C., had the biggest uptick, with a 233% jump from June to July. Delaware, Colorado, and Oklahoma all have 100% or higher increases as well.
At the metro level, New York City has seen the biggest jump in foreclosure filings, with a whopping 134% increase over the year. Riverside (California), Chicago, Atlanta, and Houston rounded out the top five for increases (though Houston’s was just 23%).
Total foreclosure rates -- the number of foreclosure filings as a share of overall housing stock -- were highest in Nevada, where one in every 3,626 housing units was foreclosed on. Delaware, New Jersey, Kansas, and Illinois also had high rates.
The Millionacres bottom line
While all these numbers are from July -- with the foreclosure ban still in place -- they do indicate places to keep an eye on, both now and down the line. As these already-started foreclosure filings finish out, it should lead to an uptick in distressed properties in these areas, opening up some much-needed inventory for investors.
Keep in mind that even with the foreclosure ban lifting, there are still mortgage forbearance options in place. Until those run out (which, for some, is quite a while), many delinquent borrowers still have protection -- as do their properties.