Resurgence Of Chicago Foreclosure Activity Not Materializing

According to the 2021 US Foreclosure Market Report released last week by ATTOM Data Solutions foreclosure activity hit an all time low last year, which you can clearly see in the graph below. That shouldn’t be too much of a surprise because there was a moratorium on foreclosures for much of the year.
Rick Sharga, executive vice president at RealtyTrac, an ATTOM company, explained what’s keeping a lid on foreclosures and how they will likely remain depressed for a bit longer:

The COVID-19 foreclosure tsunami that some people had anticipated is clearly not happening. Government and mortgage industry efforts have prevented millions of unnecessary foreclosures, and while it’s likely that we’ll see a slight increase in the first quarter, we probably won’t see foreclosure activity back to normal levels before the end of 2022.
The government’s foreclosure moratorium, the mortgage forbearance program, and the mortgage servicing guidelines enacted by the CFPB in August have kept foreclosure starts artificially low over the past year. While the recovering economy should prevent a huge increase in defaults, we should see a gradual increase in foreclosure activity as these programs expire, and servicers exhaust all loan modification options for delinquent borrowers.
We believe that repossessions will continue to be lower than normal throughout 2022. Homeowners have a record amount of equity – over $23 trillion – and over 87 percent of homeowners in foreclosure have positive equity. This means that most borrowers will have an opportunity to sell their house at a profit rather than lose everything to a foreclosure auction.

2021 Year End Foreclosure Activity
US foreclosure activity hit a historic record low in 2021

This is consistent with Black Knight’s October Mortgage Monitor Report (November is still not available for some reason) which shows delinquencies now well below 4% and almost in line with where they were immediately prior to the pandemic. I guess that low unemployment rate is for real and low labor force participation is not really a problem.
Black Knight Mortgage Delinquencies
The nation’s mortgage delinquency rate continues to improve, though it remains higher than it was pre-pandemic.

The foreclosure market report also provides an update on how long it takes to complete a foreclosure and that number inexplicably remains at the upper end of the historic range.
Average time to complete a foreclosure
The time required to complete a foreclosure remains at the upper end of the historic range. It’s Crazy Town.

Since spiking up in October Chicago foreclosure activity has drifted back down. Although December activity was up almost 116% from the previous year it’s still 61% below 2019’s level. Based on the graph below I’m now beginning to think that it’s going to end up settling right around where it would have been if the downward trend had been allowed to continue uninterrupted by the pandemic.
Chicago Foreclosure Activity
After a dramatic plunge following the pandemic foreclosure moratorium Chicago foreclosure activity has just now begun to resurge now that the moratorium has ended.

Speaking of Chicago and Illinois…both got honorable mentions in the foreclosure market report. Among states, Illinois had some of the highest foreclosure rates in the country. Among major metropolitan areas Chicago also had one of the highest foreclosure rates despite it also having one of the biggest declines in foreclosure starts.

Chicago Shadow Inventory

Over the last two months the number of Chicago homes that are in some stage of the foreclosure process has remained relatively stable. What looked like it was going to be the beginning of an upward trend just petered out and it remains at a really low level.

Chicago homes in foreclosure
The number of homes in foreclosure in Chicago declined with the moratorium during the pandemic but may be ready to rise once again.

#Foreclosures #ChicagoForeclosures #Coronavirus
Gary Lucido is the President of Lucid Realty, the Chicago area’s full service real estate brokerage that offers home buyer rebates and discount commissions. If you want to keep up to date on the Chicago real estate market or get an insider’s view of the seamy underbelly of the real estate industry you can Subscribe to Getting Real by Email using the form below. Please be sure to verify your email address when you receive the verification notice.

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