HOUSING NEWS REPORT
U.S. FORECLOSURE ACTIVITY
of 2006, up 57 percent from July of 2000 — and new home prices peaked at $250,400 in October of the same year. A home was no longer just a place to park your car — increasingly, it was a place to park your money, and everyone wanted to become a real estate investor. Unfortunately, the real estate boom turned out to be a house of cards. Far too many unqualified borrowers purchased overvalued homes with loans that turned out to be ticking time bombs. What happened next — in retrospect — was unsurprising, but still historically unprecedented: the largest wave of foreclosure activity ever in the U.S. housing market. As chronicled by ATTOM Data Solu- tions (known at the time as RealtyTrac), foreclosure activity soared. Historically, about 1 percent of loans in a given year are in some stage of foreclosure; another 4 percent are delinquent, but not yet in foreclosure. At the peak of the crisis, about 4 percent of loans were in foreclo- sure and between 11 and 12 percent were delinquent. This, remember, at a time when the number of homeowners — and the number of active mortgages — was at an all-time high. So what ulti- mately happened to all of these loans? According to a report from Hope Now, nearly 5.3 million of those loans were ultimately foreclosed on between 2009 and 2016, with the peak happening in 2010, when there were almost 1.1 million foreclosure sales. These numbers, and the financial and human damage they caused, were widely reported. Less-widely reported was what happened to millions of other loans that had become distressed: they were modified, in an attempt to help borrowers retain homeownership.
FORECLOSURE COMPLETIONS (REO)
JAN 2006 JAN 2008 JAN 2010 JAN 2012 JAN 2014 JAN 2016 JAN 2018
staggering, the number of foreclosures prevented by loan modification pro- grams was equally remarkable. Between the second half of 2007 and 2017, over 8.4 million permanent loan modifica- tions were completed, either through the government’s Making Homes Affordable Program (HAMP) or mortgage servicers’ proprietary modifications. In addition, lenders provided borrowers with other workout plans — repayment plans, pay- ment reductions, forbearance programs, etc. — on another 16.4 million loans. If this were a Hollywood screenplay, we could wish our actors a “happily ever after” and exit the movie theater. Unfortunately, many of the borrowers who held these modified and re-worked loans subsequently became delinquent again, and some defaulted, and fell back into foreclosure. This created a large number of what the industry refers to as non-performing loans (NPLs). As the U.S. economy slowly recovered from the Great Recession, investors began to purchase portfolios of these NPLs,
mostly from large financial institutions or government agencies looking to get the loans off their books. These loans were purchased at a discount, and represented an attractive investment opportunity for companies who knew how to manage them. While a few of these investors bought NPLs with plans to quickly execute fore- closures and either sell off or rent out the properties attached to the loans, others found a more lucrative approach that constituted a win/win scenario for the investor and the delinquent borrower. It turns out that in many cases, the best outcome is to turn an NPL into an RPL — a re-performing loan. Many of the com- panies who bought NPLs (including my employer, Carrington) have mortgage ser- vicing operations that specialize in helping borrowers with financial challenges. They share a mutual goal with the customer: to keep the borrower in the home. While this provides the borrower with another chance at homeownership, it also provides the investor with multiple opportunities for
Encore Performance "MY TAKE" ARTICLE FROM ATTOM DATA SOLUTIONS.
by Rick Sharga
ately — and rather unceremoniously — by what may have been the most rapid and most severe housing bust in U.S. history. During the boom, homeown- ership rates, fueled by reckless lending, approached 70 percent. The number of homes sold peaked at over 7.2 million existing home sales and nearly 1.4 million new home sales in 2005. Home prices soared — the median existing home price peaked at $230,400 in July
merica loves a good second act. This is especially true when
the least-noticed second acts in Ameri- ca today isn’t about an individual — or even about people, at least not directly. It’s about mortgage loans. And it’s a pretty amazing story.
the first act was depressing, or an indi- vidual suffered unfairly, only to come out on top during the process of rebirth. Usually, a second act has to do with a person who’s spent a lifetime doing one thing and has now found an opportu- nity or a calling to pursue something he or she is passionate about, or can achieve great success doing. But one of
SECOND ACT: FROM NON-PERFORMING TO RE-PERFORMING While the number of foreclosures was
ACT ONE: THE GREAT RECESSION
The housing boom of the early 2000s, you may recall, was followed immedi-
46 | think realty magazine :: july 2018
thinkrealty . com | 47
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