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Economy in Brief

Foreclosures Continue to Ebb
by Charles Steindel  August 16, 2018

The Mortgage Bankers' Association's latest numbers on home mortgage delinquencies and foreclosures show that problems with home loans continue to fade. At the end of the second quarter, 1.05 percent of all mortgages on 1 to 4-unit properties were in foreclosure. 1 percent appears to be about what the rate would be in “normal” times; it was last that low at the end of the third quarter of 2006. The peak rate was 4.64 percent at the end of 2010. Looking at the state-level data, New Jersey (2.75 percent) and New York (3.09 percent) were the only ones with foreclosure rates above 2 percent on June 30. Wyoming's rate was a microscopic .14 percent (according to the MBA, only 388 mortgages in the Cowboy State were in foreclosure). Puerto Rico, though, reports a 5.46 percent foreclosure rate (Puerto Rico's numbers are included in the national totals). This high rate, though, does not appear to be due primarily to the aftereffects of Hurricane Maria; it's actually lower than pre-storm values.

The number of foreclosed mortgages at the end of the second quarter was estimated to be a bit over 400,000—a fraction of the more than 2 million foreclosures underway in 2009-2010. Does this mean that the home lending market is now fully recovered? Not necessarily. The number of home mortgages is now estimated to be 38.3 million; that compares to a peak of around 45.5 million at the end of the third quarter of 2008. In other words, over the last decade the number of mortgages has dropped more than 15 percent. That decline could reflect laudable caution on the part of borrowers and lenders, as well as aging staying-in-place baby-boomers paying off loans made years ago (like myself, for instance). Still, given the continuing growth in the population and associate housing needs, the shrinkage of the mortgage market can't be seen as altogether benign, even if default rates have shriveled.

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