mortgage delinquencies and foreclosures: utah · 2013-06-07 · data caveats data on the real...
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Mortgage Delinquencies and Foreclosures: Utah
Jan BontragerCommunity Development Department
Federal Reserve Bank of San Francisco
October 1, 2008
Analysis of First American LoanPerformance data provided by the Federal Reserve Board of Governors. Do not cite or reproduce without permission.
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Overview of Presentation
What are current trends in delinquencies and foreclosures in Utah?
Mortgage Bankers Association data Trends in Delinquencies and Defaults
HOPE NOW Alliance Servicer DataWhat are the primary drivers of foreclosures?
Declining house valuesHigh proportion of subprime loansDeclines in underwriting standards
What neighborhoods in Utah are witnessing increased issues with foreclosures?
McDash data on foreclosures and REOsLoanPerformance data on subprime loans
What responses are needed?
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Data Caveats
Data on the real estate and mortgage markets are collected by many different sources, most costly and proprietaryAs a result, it is important to consider the limitations of data presented
Different definitions of subprime may affect the reporting of rates of delinquencies and foreclosuresDifferent methodologies and different sampling methods may affect the reportsAggregated data at the zip code level can mask significant geographic variation and the types of borrowers affected
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Trends in Delinquencies and Foreclosures
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Significant Increase in National Foreclosure Starts
Source: Mortgage Bankers Association, National Delinquency Survey, 2nd Quarter 2008
Foreclosure Starts: Percent of all Loans
0807060504030201
Sour ce: Mor tgage Banker s Association /Haver Analytics 09/23/08
1. 2
1. 0
0. 8
0. 6
0. 4
0. 2
1. 2
1. 0
0. 8
0. 6
0. 4
0. 2
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Percent of Mortgage Loans in Foreclosure or REO (by zip code)
Source: McDash Analytics, LLC and FRBSF calculations
August 2008
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Foreclosures Concentrated in Subprime ARM Market
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
2000 2001 2002 2003 2004 2005 2006 2007 2008
Perc
ent F
orec
losu
re S
tart
s
All Loans Prime Fixed Rate Prime ARM
Subprime Fixed Rate Subprime ARM
Source: Mortgage Bankers Association, National Delinquency Survey, 1st Quarter 2008
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0
0.5
1
1.5
2
2.5
Alaska Washington Oregon Hawaii Idaho Utah Arizona California Nevada
Fore
clos
ure
Star
ts (P
erce
nt o
f All
Loan
s)
Q2:2005 Q2:2006 Q2:2007 Q2:2008
Source: Mortgage Bankers Association, National Delinquency Survey, 2nd Quarter 2008.
Utah has seen an Increase in Foreclosure Starts
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HOPE NOW Servicer Data for Utah
Source: Hope Now Servicing Data, July State Data Tables 2008, includes both prime and subprime loans
2.21%1.55%60+ DeliquencyRate
600168Foreclosure Sales
811244Loan Modifications
1,8092,098Repayment Plans
2nd Qtr 20082nd Qtr 2007
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Delinquency Rates Vary Significantlyby Mortgage Type
2nd Qtr 20081st Qtr 20072nd Qtr 20081st Qtr 2007
6.89
7.88
5.26
2.40
1.37
Percent Past Due
6.94
14.96
10.23
4.99
2.00
.41.47FHA
4.011.42Subprime ARM
1.400.70Subprime Fixed
1.060.24Prime ARM
.200.11Prime Fixed
Foreclosures StartedMortgage Type
Source: Mortgage Bankers Association, National Delinquency Survey, 2nd Qtr 2008
Utah: Delinquency and Foreclosure Rates, 2nd Qtr 2008
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Trends in House Values
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07060504030201
Sour ces: MBA, SNPCAS /Haver 03/27/08
0. 9
0. 8
0. 7
0. 6
0. 5
0. 4
0. 3
200
180
160
140
120
100
Nationally, Subprime Foreclosure Rates Closely Track Declines in House Values
OFHEO House Price Index
Foreclosure Starts
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Utah’s Housing Market SofteningOFHEO House Price Index (2000=100)
0807060504030201
Sour ce: OFHEO /Haver 09/23/08
180
160
140
120
100
80
180
160
140
120
100
80
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Metropolitan Areas Also Seeing Softening
OFHEO House Price Index (2000=100)
0
50
100
150
200
250
2000 2001 2002 2003 2004 2005 2006 2007 2008
OFH
EO H
ouse
Pric
e In
dex
(200
0=10
0)
St. George Salt Lake City Provo Ogden
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Utah Did See Surge in Subprime Lending
Economic research suggests that the current mortgage crisis has been driven by declining house values
Utah vulnerable to same dynamic if house prices fall
According to the Pew Center for the States, 1 out of 25 homeowners in Utah are projected to face foreclosure in 2008-2009, the 5th highest projected foreclosure rate in the nationCritical to help distressed borrowers now, and refinance into more sustainable loan products
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Utah “Hot Spots”
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Utah – Foreclosure Rates, All Loans, April 2008
Source: McDash Analytics, LLC and FRBSF calculations, Data from April 2008
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Source: McDash Analytics, LLC and FRBSF calculations, Data from August 2008
Utah – Foreclosure Rates, All Loans, August 2008
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Utah – Serious Delinquencies on the Rise
Source: McDash Analytics, LLC and FRBSF calculations, Data from August 2008
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Utah - Concentrations of Subprime Loans
Source: Analysis by Federal Reserve Board of Governors, First American LoanPerformance Data, March 2008. Data represent a sample of subprime loans, approximating 70 percent of subprime loan volume. Data aggregated at the zip code level.
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Salt Lake City - Concentrations of Subprime Loans
Source: Analysis by Federal Reserve Board of Governors, First American LoanPerformance Data, March 2008. Data represent a sample of subprime loans, approximating 70 percent of subprime loan volume. Data aggregated at the zip code level.
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Responding to Foreclosures in Utah
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Foreclosure Mitigation Toolkit
Available online at http://www.frbsf.org/community/issues/toolkit/index.htmlThe resources in the toolkit are presented as a four-step process
Step One: Assess the Foreclosure Situation Step Two: Reach troubled homeowners Step Three: Establish post-foreclosure support systems Step Four: Stabilize neighborhoods
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Responding to the Foreclosure Crisis
Multi-pronged strategy is needed to stem the foreclosure crisis
Foreclosure prevention: borrower outreach, loan modification (including principal reduction)Addressing vacant properties: ensuring that servicers maintain propertiesREO property disposition: return REO properties into productive use, affordable housingEnsuring continued access to credit and homeownership: credit repair, financial education, responsible lending
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Key Challenges
Shifting economic ground, locally and in the capital marketsIndustry complexity and fragmentationCapacity to respond to scale of the problemFundingValuationLack of established models, few “experts”Questions regarding how to target interventions effectively
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Community Strategies – Foreclosure Prevention
Foreclosure prevention: borrower outreach, loan modification
HOPE NOW: servicer guidelinesNew technology platforms can assist counselors/servicers in doing loan modificationsNew finance products: e.g., H4H program just releasedMost effective when there is a direct relationship between counselor and servicerBorrower outreach events
Prevention remains key, since over the long-term, more cost effective than having to respond to foreclosed property issues
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Community Strategies - Addressing Vacant Properties
Goal is to establish continuity of responsibility for property, and to help finance the maintenance of vacant properties
Code enforcement (e.g. Chula Vista and Stockton) Vacant property registration and fees (e.g. Chicago)
Identifying responsible party on the propertyState Law – Georgia SB 531 requires that notice of the foreclosure sale includes the name, address, and telephone number of the “individual or entity who shall have full authority to negotiate, amend, and modify all terms of the mortgage with the debtor.”
Strategies for taking over abandoned propertiesReceivership modelsTax foreclosure
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Community Strategies – REO Property Disposition
Intervening before Foreclosure: entails buying the delinquent note before foreclosure and working with borrower first, if not successful, return to either rental or ownership
CDFIs: Self Help, Colorado, and MassachusettsNeighborhood Revitalization Approaches: targeting neighborhoods and using ‘traditional’ community development tools to acquire and rehab housing units
Neighborhood Progress Inc. in ClevelandDallas, Rochester, and ChicagoDC: New Markets Tax Credits
Lender Approaches: working with a single lender to acquire a “bundle” of properties at a discount
Bulk PurchasePilot studies (e.g. HSBC model)
Borrower approaches: providing favorable financing to borrowers interested in buying foreclosed properties
CAL FHA product
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Key Lessons
Use data strategicallyNational data sets can’t capture local dynamics or “property level” dataEngage a local partner (e.g. title company, university, public records co., real estate agent) who can help to identify properties and their owners
Cross-sectoral collaborationImportance of political support and the “stick” of regulationTask force model works well, especially when it brings together government, nonprofits, lenders/servicers, and private interests
Draw on a wide range of funding sourcesUse public subsidies wisely
Cross-subsidize affordable housing goals by selling some properties atmarket rateAnticipate long “holding” costs and ensure you have enough capital in addition to subsidy to implement your business plan
Evaluate strategies across strong/weak markets