Foreclosures figures paint encouraging picture of borrowers

Asking values for homes that are up for sale are climbing. In fact, among existing residential properties on a year-over-year basis, the typical cost of buying a house has risen every single month for more than five years, according to the National Association of Realtors. One might think that this trend puts homeowners at risk of not being able to make their payments, specifically their mortgages.

But as a recently released survey indicates, foreclosure activity is at its lowest ebb in more than a decade, suggesting borrowers are good loan candidates.

Between July and September, there were a total of 191,824 foreclosure filings across the U.S., ATTOM Data Solutions reported. That's a decrease of 13 percent from 2017's second quarter and a 35 percent drop from the penultimate quarter of 2016. Indeed, default notices, bank repossessions and scheduled auctions haven't been this low since 2006.

Foreclosure rate at 11-year low
With median existing-home values reaching $245,100 - based on the most recent figures available from the NAR - average loan balances are swelling, credit agency TransUnion reported. But thanks to smarter spending habits and lending protocols implemented by banks - not to mention more people back at work, with the unemployment rate at a 17-year low, according to the Labor Department - mortgage delinquencies are fewer in number. CoreLogic reported the foreclosure rate fell 0.2 percent in July, which puts the number of homes in some stage of the foreclosure process at its lowest point since July 2007.

Early-stage mortgage delinquencies have also trailed off, slipping to 2 percent in July, according to CoreLogic, which is down from 2.3 percent during the corresponding month in 2016. These are defined as mortgages that are overdue between 30 and 59 days. 

Could encouraging trend reverse itself?
Frank Martell, CoreLogic president and CEO, indicated that while delinquency rates are trending in the right direction, some figures suggest the tide may turn.

"For example, markets affected by the decline in oil production or anemic job creation have seen an increase in defaults," Martell explained. "We see this in markets such as Anchorage, Baton Rouge and Lafayette, Louisiana where the serious delinquency rate rose over the last year."

Other parts of the U.S. where foreclosure starts have climbed - specifically in the third quarter - include Dallas, Denver, Cincinnati and Cleveland, according to ATTOM Data Solutions. Nationwide, though, starts are down 16 percent from the same three-month period in 2016.

Foreclosures can severely impact consumer credit reports, lowering their scores dramatically. These reports are important for lenders to examine before coming to a decision on approval. But consumer credit reports only tell part of the story, as alternative payment data can provide information that provides more context.

At Microbilt, we provide our customers with the decisioning tools that can help ensure they make well-informed choices on who to lend to. We do this through several scoring techniques that go beyond debt collection data and three-digit FICO scores. Contact us directly to learn more.