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Analyst: Recent Spike in Foreclosure Starts Likely Due to Seasonality

Black Knight Financial Services Foreclosure StartsForeclosure statistics have been positive by and large for the last two to three years. Nearly all numbers have experienced across-the-board decreases as states are clearing out their backlog of foreclosed residential properties and the U.S. economy continues to recover from the crisis of seven years ago.

For example, in the most recent report by CoreLogic, released on Tuesday, March 10, foreclosure completions – the true indicator of homes lost to foreclosure – declined by 33 percent year-over-year nationwide from 822,000 down to 549,000. The percentage of residential mortgages that were in any state of foreclosure in January also plummeted year-over-year in January, from 2.0 percent down to 1.4 percent, according to CoreLogic, the lowest national level since March 2008 right when the crisis was beginning.

In Black Knight's January 2015 Mortgage Monitor, released on Monday, March 9, the delinquency rate for mortgage loans and pre-foreclosure inventory sales (short sales) experienced large year-over-year declines.

According to Black Knight, however, one stat experienced an increase – foreclosure starts jumped by 5.5 percent year-over-year in January up to their highest level since December 2013. About 51 percent of January's reported total of 94,300 foreclosure starts were repeat foreclosures, according to Black Knight.

January's spike in foreclosure starts is likely attributed more to seasonality than any type of pattern that may be forming, according to Black Knight's SVP of Loan Data Products, Trey Barnes.

“While January did see a 12-month high in foreclosure starts, the data doesn’t seem to suggest that this is indicative of any sort of long term trend at this point in time," Barnes said. "In fact, it’s likely more a matter of seasonality than anything, as we’ve seen January increases in starts for three of the last four years. Overall, foreclosure starts still remain down. The numbers for 2014 were 20 percent lower than the year before, and Q4 2014 foreclosure starts were 26 percent below Q4 2013. While this certainly bears watching, it’s important to remember that one month does not a trend make, and for now, that’s what we’re looking at: one month’s data."

A couple of other stats in Black Knight's January Mortgage Monitor are notable. The number of properties in foreclosure pre-sale inventory (waiting to be sold in a short sale) also took a big tumble in January, according to Black Knight. The prepayment rate, also known as the single-month mortality rate, declined by 23 percent from December to January.

While the negative foreclosure numbers are on the decline, there is still much room for improvement. The number of completed foreclosures for the month of January was 43,000, according to CoreLogic, a year-over-year decline of 22.5 percent (and a 14.7 increase from December's revised total of 37,000). While this was a substantial decline, it is still more than double the pre-recession monthly average of foreclosure completions (21,000 from 2000 to 2006), according to CoreLogic.

Economists expect foreclosure numbers will continue to improve as they have been doing for the last two to three years, further suggesting that January's spike in foreclosure starts was an aberration.

"With economic growth in 2015 expected to be better than last year, further declines in both delinquencies and foreclosures are projected for this year," CoreLogic Chief Economist Frank Nothaft said.

About Author: Brian Honea

Brian Honea's writing and editing career spans nearly two decades across many forms of media. He served as sports editor for two suburban newspaper chains in the DFW area and has freelanced for such publications as the Yahoo! Contributor Network, Dallas Home Improvement magazine, and the Dallas Morning News. He has written four non-fiction sports books, the latest of which, The Life of Coach Chuck Curtis, was published by the TCU Press in December 2014. A lifelong Texan, Brian received his master's degree from Amberton University in Garland.
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