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These charts and maps are designed to inform policymakers and
the public at large about the current status and possible
future course of the distressed real estate situation. At the
national level, the percent of 1-to-4 family mortgage loans in
serious delinquency (90+ days) has declined to about 3 percent
of all first mortgage loans as of the second quarter of 2012,
down from a peak of 5 percent in the first quarter of 2010.
But this does not necessarily mean that the worst of the
distressed residential real estate problem is behind us.
Indeed, the inventory of properties owned by
lenders—referred to as real estate owned, or
REO—could rise rapidly in many states through the end of
2013. While this depends on many factors, the number of days
it takes to complete the foreclosure process is critical in
influencing this inventory level. On average, that length of
time has risen substantially in recent years, but whether it
continues to rise, stabilizes, or declines will have a major
impact on the the change in these REO inventories.
In the analysis here, the implications of these three
scenarios are examined, as well as a closer look at regional
Scenario 1: If Number of Average Days
Continues Recent Trends
If recent trends, where the
average number of days that properties remain seriously
delinquent and in foreclosure was rising nationally,
continue through December 2013, the REO inventories in most
states would decline. However, a limited number of states,
particularly New York and New Jersey, may still experience
significant increases in REO inventory.
Scenario 2: If Number of Average Days
If the recent trends of the individual states stabilize at
mid-2012 levels through December 2013, the REO inventories
in most Western states would decline, while states in the
Northeast would have sizeable increases.
Scenario 3: If Number of Average Days
If the average time properties spend in serious delinquency
and in foreclosure declines, REO inventories would rise
sharply in most states — tripling in New York and more than
doubling in New Jersey. Only California and Arizona would
have significant reductions in REO inventory.
Average Days Seriously Delinquent and
in Foreclosure When Property Becomes REO
Nationally, the average
number of days a mortgage loan remains in serious
delinquency has increased dramatically as the housing
crisis has unfolded. This means that for many properties,
the foreclosure process has not been resolved. At some
point in the future many of these loans will likely
transition to REO and be offered for sale. Shown here are
three possible scenarios for what could happen: First, if
the recent trend for the length of time in serious
delinquency continues through the end of 2013; second, if
the trend stabilizes near mid-2012 levels; and third, if
the overall trend is a decline toward pre-crisis levels.
Gray shading indicates an NBER recession. Source:
Federal Reserve Bank of New York analysis based on data
Average days seriously delinquent
and in foreclosure when property becomes REO
inventory if average days continues recent trends
REO inventory if average days
REO inventory if average days
For each state, figures for REO
inventory, as of June 2012, are shown, along with the share
that this represents of the national REO inventory and the
share this is of all mortgages in the state. The corresponding
rank of each state for these two categories is also given.
Finally, the state level change in REO inventory from June
2012 to December 2013 under the three scenarios is shown.
JUDICIAL FORECLOSURE STATE
Distressed Sales Share by County
Each map shows the county-level share that distressed sales
represented out of all repeat sales that month. Distressed
sales include foreclosure sales, short-sales, and
deeds-in-lieu. Distressed sales occur even in good economic
times, but as the housing crisis unfolded, the share of sales
that were distressed at the national level increased from less
than 5 percent in 2003 to more than 30 percent in 2012.
Distressed sales are a useful indicator of the magnitude of
the housing downturn and a proxy for the speed of recovery or
About the Data
National and state level data on number of properties in the
foreclosure process and in REO were provided by CoreLogic
under contract with the Federal Reserve Bank of New York. The
projections of future REO inventories were conducted by
CoreLogic under a range of alternative assumptions about
average days in 90+ day delinquency and average days in
foreclosure. Aside from changes in those two variables, all
other state and loan category roll rates were held constant at
their second quarter 2012 averages. These roll rates were also
based on the existing CoreLogic state level home price
projections through the end of 2013.
County-level distressed sales data are from CoreLogic as well.
The data are based upon a repeat sales methodology and come
from public records supplemented with with LoanPerformance's
(LP) securities and servicing databases. Repeat sales do not
included new home sales, thus they measure the turnover of the
existing housing stock. The servicing databases include both
LP's Prime and Subprime database which covers 80 percent of
the nation's active prime mortgages, 100 percent of the Fannie
Mae and Freddie Mac portfolios, and $542 billion in active
subprime mortgages. Additionally, the securities database
covers over 90 percent of the non-Agency mortgage and
asset-backed securities market. To mitigate small-sample
concerns and to get a good reading of transaction flows, we
use a 12-month moving average of all repeated sales and
non-distressed repeated sales when calculating the fraction of
distressed sales. Distressed sales share for counties with
fewer than 25 repeat sale transactions, on average, are not