The share of U.S. homes in foreclosure fell slightly in January, down 3.55% from December and down 12.94% from January 2016. The figures come from real estate data company ATTOM Data Solutions, which bases foreclosure rates on the portion of residential properties in any of the three stages of foreclosure: default, auction and repossession.
Much of the decrease came from a decline in foreclosure starts (default), which fell 11.55% from December and 20.11% from January 2016. A great deal of foreclosure activity came from banks purchasing foreclosed homes — the end of the process.
The overall decline indicates fewer American homeowners are falling behind on their mortgages and, as a result, avoiding foreclosure and credit damage. (You can see how your mortgage and other accounts affect your credit by reviewing your free credit report summary, updated every 14 days, on Credit.com.) The list of states with the highest foreclosure rates includes most of the same states that were on it in past months, though most of them saw declines, as well. Here are the 10 states that had the largest portions of homes in foreclosure in January.
The number of U.S. homes in foreclosure fell to a 10-year low in 2016, according to a report from real-estate data company ATTOM Data Solutions, with 933,045 residential properties in some state of foreclosure during the year. That’s a 14% drop from 2015 but is still well above the pre-crisis level of 2006, when 717,522 homes had a foreclosure filing (a notice of default, scheduled auction or bank repossession.)
Much of the nation’s foreclosure activity is left over from the housing crisis, given the foreclosure process is a lengthy one. Among foreclosures completed in the fourth quarter of 2016, the average home had been in the foreclosure process for 803 days, or just over two years. In the same quarter, 55% of loans actively in foreclosure had been originated between 2004 and 2008.
Still, many Americans struggle to afford their mortgage payments. Among the 0.7% of homes in some state of foreclosure last year, slightly more than half of them were new, meaning the homeowners first fell behind on their loans in 2016. Though foreclosure starts were down 16% from 2015, 15 states and the District of Columbia saw a rise in new foreclosures in 2016. (If you’re concerned about being able to afford your home payments, you can read here about how to save your home from foreclosure. You can also see how your mortgage affects your credit by reviewing two of your credit scores for free, with updates every 14 days, on Credit.com.)
Fourteen states had foreclosure rates above the national average, and two of those states even had higher foreclosure rates in 2016 than they did in 2010, when the national foreclosure rate peaked. Here are the 10 states with the highest foreclosure rates in 2016, many of which have a significant backlog of legacy foreclosures (loans that defaulted several years ago).
Foreclosure activity in the U.S. spiked about 27% from September to October — the largest month-over-month increase in foreclosures since August 2007, according to a report from the real-estate focused company ATTOM Data Solutions. One in every 1,258 residential housing units had a foreclosure filing in October, and while the foreclosure rate is higher than it was in September, it’s still lower than it was at the same time last year.
ATTOM defines foreclosure activity as a property whose owner has received a notice of default on the mortgage, is scheduled for auction or has been repossessed by the bank (basically the beginning, middle and end of the foreclosure process, though these terms and procedures vary by state). Much of the foreclosure activity in recent months came by way of bank repossessions, but foreclosure filings of all kinds increased from September to October.
“The increase in October isn’t enough evidence to indicate a new foreclosure crisis emerging in these states, but it certainly demonstrates that this housing recovery is not completely devoid of risk,” said Daren Blomquist, senior vice president at ATTOM, in a press release about the report. “The loans used in this housing recovery that appear to be most susceptible to foreclosure are those such as FHA and VA with low down payments.”
Forty-six states reported a month-over-month increase in foreclosure activity, meaning homeowners all over the country may be struggling to make their home loan payments. And as much as making a late payment on your mortgage can hurt your credit, losing your home to foreclosure can damage your credit for far longer. If your mortgage payments are a challenge, consider reaching out to your lender for help, take a look at this guide on how to save your home from foreclosure and keep an eye on how your loan affects your credit. (You can do that by getting your free credit report summary every two weeks on Credit.com and getting your free annual credit reports.)
Because only four states and the District of Columbia saw a drop in their foreclosure rate from September to October, the list of the 10 states with the highest foreclosure rates remains relatively similar to what it’s been in recent months. Here’s where foreclosures were most common in October.
Residential foreclosure activity fell in September to its lowest level since December 2005, according a monthly report from ATTOM Data Solutions, a housing data company. One in every 1,600 housing units had a foreclosure filing — including notices of default, scheduled auctions and bank repossessions — which is down nearly 24% from the same time last year.
Not only has overall foreclosure activity decreased, the average foreclosure process got a little shorter. The average foreclosure took 625 days to complete as of the third quarter of this year, which is down from 631 days in the second quarter and down from 630 days in the third quarter of 2015. It’s the first time there’s been a year-over-year decline in that timeline since ATTOM started tracking it at the beginning of 2007.
“Foreclosure activity has been on a steady slide downward over the past six years, finally dropping back below pre-crisis levels in September,” Daren Blomquist, senior vice president at ATTOM Data Solutions, said in a press release about the report. “While we’ve know[n] that the national foreclosure problem has been dying a long, slow death for quite some time, the final nail in the coffin of the foreclosure crisis is the year-over-year decrease in the average foreclosure timeline nationwide that we saw in Q3 2016.”
It’s not necessarily that clean-cut, however: The housing crisis played out differently state by state, and foreclosure can take a very long time in some jurisdictions. For example, among foreclosures completed in New Jersey last quarter, the process lasted an average of 1,262 days. That’s nearly 3 1/2 years between defaulting on the mortgage and actually losing the home, and when you figure that’s the average amount of time it takes, there are very likely people who defaulted on their loans during the recession who are still living in those homes.
“A lot of people who are delinquent on their loans are able to stay in their homes for two to five years, depending on what state they’re in. That has dragged out the entire foreclosure process,” Logan Mohtashami, a housing data analyst and a senior loan manager at AMC Lending Group in Irvine, California, said. “The foreclosure crisis, in the sense that new delinquencies were being created, ended years ago. The process of working through the foreclosures from the housing crisis is still going on.”
Additionally, the share of government sponsored loans that are seriously delinquent (more than 90 days past due) is still a little higher than it was pre-recession, according to data from Freddie Mac, Freddie Mae, the Mortgage Bankers Association and the Urban Institute. If you’re struggling to afford your mortgage, here are some things you can do to avoid losing your home to foreclosure and prevent devastating damage to your credit score. (You can see how your home loan and other accounts affect your credit by getting a free credit report summary every 14 days on Credit.com.)
Those states where the foreclosure crisis lingers are many of the same that have had high foreclosure rates for much of the last few years. Here’s where foreclosure rates are the highest, as of last month.
U.S. foreclosure activity picked up a bit from July to August, but it’s still generally on the decline, according to the latest report on the topic from ATTOM Data Solutions. One in every 1,395 U.S. housing units had a foreclosure filing in August (a default notice, scheduled auction, bank repossession or an something similar — filings vary by state), and that’s about a 10% increase from July. The change since last August shows a more encouraging trend: The national foreclosure rate fell by about 13%.
But in the states where foreclosure rates have been the highest in recent years, things remain volatile. While seven of the 10 states with the highest foreclosure rates last month recorded year-over-year declines in foreclosure activity, only three of those states saw declines in excess of the national average. And in six of those 10 states, the foreclosure rate increased more than the national average since July.
Any stage of foreclosure can be stressful on a homeowner, whether they’ve fallen behind on a mortgage payment for the first time or are at the end of a sometimes years-long process of forfeiting their home to the bank. In addition to the financial and emotional affect these processes have, they can also seriously damage a consumer’s credit for many years. But even if you’ve started to struggle with your mortgage payments, it’s worth exploring your options for avoiding foreclosure. All mortgage borrowers should keep an eye on how their home loan affects their credit as part of good financial housekeeping, as well — you can get your credit scores, updated every 14 days, by getting a free credit report summary on Credit.com.
Here’s an update on how some of the states with the highest foreclosure rates are faring, based on the August foreclosure data from ATTOM.
Buying a home is one of the largest financial commitments you can make and sometimes people get in over their heads with this purchase. According to the latest data from RealtyTrac, a total of 253,408 U.S. properties started the foreclosure process in the first half of this year. While that is a large number, it is down 17% from a year ago, which is the lowest amount seen in a half-year time since RealtyTrack started monitoring foreclosure data in 2006.
“Although there are some local outliers, the downward foreclosure trend continued in the first half of 2016 in most markets nationwide,” Daren Blomquist, senior vice president at RealtyTrac, said in a press release.
If you’re having a hard time with your housing budget, you may want to consider asking your lender(s) for guidance to help you avoid foreclosure. Missing a mortgage payment or two can affect your credit scores, but a foreclosure will be even more detrimental. (To see how your mortgage is affecting your credit scores, you can review your free credit report summary, updated monthly, on Credit.com.)
Check out the 10 states with the highest foreclosure rates so far in 2016.
During the Great Recession, many Americans lost their homes due to foreclosure. In fact, according to real estate data company RealtyTrac, there were 6,324,545 completed foreclosures from January 2006 to April 2016.
“It is a big number,” Daren Blomquist, Senior Vice President of RealtyTrac said in an email. “Normal would be around 250,000 bank repossessions per year. These last 10 years represented the biggest loss of home ownership and shifting of real estate wealth since the Great Depression.”
“The foreclosure crisis is largely behind us, although still certainly lingering in certain pockets,” Blomquist said. “Unfortunately, we are already seeing signs of another housing bubble in certain markets, so people should continue to be cautiously optimistic when it comes to the housing market.”
But Blomquist says people who can truly afford to buy a home may still benefit from it.
“Homeownership done responsibly is still one of the best ways to build wealth,” Blomquist said.
What a Foreclosure Can Mean for You
“Foreclosure will obviously create a crater in a credit report for some time,” Troy Doucet, attorney with Doucet & Associates in Columbus, Ohio, said in an email. “However, foreclosure is not the end of the world. Those with foreclosure in their credit past will find their credit scores slowly improve as time passes. After a few years, they may even be able to buy another house.”
You’ve worked hard to put your foreclosure behind you. Your monetary issues leading to the loss are in the past and you’re ready to move on, both figuratively and literally. There’s just one small thing potentially holding back: your credit score.
But exactly how long do you have to worry about a foreclosure harming your credit?
A foreclosure will appear on your credit report as of your foreclosure filing date — not at the date of sale or tail-end of the foreclosure process. At this point, you can expect your credit score to take a big hit — up to 300 points, depending on the other negative information (like a first missed mortgage payment) that may already be on your report.
The foreclosure will generally remain on your credit report for the next seven years. But, while it will affect your score for that time, you won’t necessarily be saddled with a bad score for the duration.
A FICO study, for instance, found that a consumer with a 680 FICO Score (before the foreclosure event) could reach that same score level in roughly three years. And that type of credit score, while not worthy of the best terms and conditions, could net you financing, like an auto loan or, at the very least, a secured credit card.
Will I Have a Hard Time Getting a Mortgage?
Unfortunately, even as score rebounds, the presence of a prior foreclosure could make it tricky to score a new home loan. Just seeing that line item could make many mortgage lenders wary of approving your application, Scott Sheldon, a senior loan officer based in Santa Rosa, California and Credit.com contributor, said.
“The longer in the past, the less of an issue [the foreclosure is],” Sheldon said in an email. “Waiting time is the most important thing they look at.” He estimates an applicant with a foreclosure on file would need to wait around three years to obtain government financing, like a Federal Housing Administration home loan, and could need to wait the full seven years for a standard 30-year conventional loan.”
And it’s important to make sure the foreclosure is removed from your credit report once that 7-year waiting period elapses. You can check your credit reports for free each year at AnnualCreditReport.com. If a foreclosure appears longer than it should, be sure to dispute any inaccuracies with the credit bureau in question.
A foreclosure can lead to a litany of problems, financial and otherwise, for homeowners and their families. And, as people work to keep their home or simply get through the filing, they often don’t have time to consider their credit score. In fact, for a time, perhaps they shouldn’t.
“If a person is going through foreclosure, they have very serious financial issues that are probably reflected in very poor scores,” Rod Griffin, director of public education for Experian, said in an email. “If they cannot manage the debts they have, they should be focused on regaining control of their finances, not worrying about a credit score because they shouldn’t be considering applying for new credit in the near future.”
Still, it can be important to note somewhere down the line how much damage you may ultimately have to repair due to foreclosure.
Perhaps unsurprisingly, its appearance on your credit file can cost your score to drop dramatically. The exact point drop will vary, depending on where your score was at the time and what else is in your credit profile. But, according to a FICO study, foreclosure can cause an excellent score of 780 to drop as low as 620. A good score of 720 can drop as low as 570 and an average score of 680 can drop to as low as 575.
This damage can be contained if the foreclosure itself is the only negative information appearing on your credit report.
“As long as the consumer manages to keep the foreclosure isolated by consistently paying all other credit obligations on time and keeping their revolving debt to a minimum, the negative impact of the foreclosure will be contained,” Can Arkali, a principle data scientist at FICO, said in an email.
However, foreclosures don’t typically take place in a vacuum. They’re usually preceded by other incidents — like missed mortgage or other loan payments — that could cause your credit rating to fall by as much as 300 points throughout the few months that led to your home being foreclosed upon.
How Long Before My Score Recovers?
These incidents can depress your credit for quite some time.
“A foreclosure remains on a credit report seven years, so it will have a long-term effect on our creditworthiness,” Griffin said. “But, because negative information is deleted eventually, you can rebuild your creditworthiness if you take control of your debts and build a history of positive payments that will continue to appear after the foreclosure disappears.”
FICO estimates that a consumer with a 680 FICO Score (before the foreclosure event) could reach that same score level in roughly three years.
“This is not an absolute guideline, but rather a rough estimate on the basis of a representative credit profile of the ‘typical’ consumer credit file that scores 680,” Arkali said.
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