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Low Foreclosure Rates May Obscure ‘Market Reality’

Low numbers are attributed to CARES Act protections, but some states have reported an increase in foreclosure starts.

Foreclosure activity is down—way down—but market perception isn’t market reality given the factors that currently prevent completed foreclosures (REOs), according to the January 2021 U.S. Foreclosure Market Report [1] from ATTOM Data Solutions.

At the time of the report, default notices, scheduled auctions, and bank repossessions—all types of foreclosure filings—were down 11% from December 2020 and down 80% from January 2020.

One of the major reasons foreclosure numbers are low is the continuation of the CARES Act mortgage forbearance program and the moratorium on government-backed loans.

"January foreclosure activity declined at least in part due to the Biden Administration's decision to continue the foreclosure moratorium on government-backed loans through the end of March," said Rick Sharga, RealtyTrac EVP. "The moratorium and CARES Act mortgage forbearance program have effectively prevented millions of seriously delinquent loans from entering the foreclosure process. But it's important to remember that the number of foreclosures we're seeing right now doesn't reflect market reality—and that's something we'll need to deal with once these government programs expire.”

Foreclosure completions are also on the decline. In January 2021, REOs were down 28% from the previous month. And compared to the previous January, REOs dropped 83%, which continued a 13-year trend of declining annual REOs.

Looking at the 220 metropolitan statistical areas with at least 200,000 people and at least 100 foreclosure starts in January 2021, double-digit annual declined were reported in Chicago (down 87%); New York (down 85%); Los Angeles (down 80%); Dallas (down 77%); and Houston (down 69%).

Of course, not every city or state saw a decline. Washington, Virginia, North Carolina, Massachusetts, and Ohio all countered the national trend with increases in foreclosure starts. Seventeen states in total reported increases.

Read the report by ATTOM Data Solutions [1] for more information.