Foreclosure starts surged in September

Foreclosure starts and filings have spiked on both a quarterly and monthly basis since the federal moratorium ended.

Mortgage servicers started 10,289 foreclosures in September, up 23% from August’s 8,348 and 106% year-over-year, according to Attom Data Solutions. In the third quarter, 25,209 foreclosures were started, shooting up 32% from the second quarter and 67% from the year before. It represented the first quarterly increase over 10% since 2014 and the highest since Attom started tracking in 2005, besting 28% in 1Q 2009.

Filings — defined as default notices, bank repossessions or auctions — followed similar patterns, with 45,517 properties impacted in the third quarter, rising 34% from 2Q and 68% from 3Q 2020. Meanwhile, 19,609 mortgaged properties filed in September, jumping 24% from 15,838 in August and 102% from one year ago.

However, the numbers still trail far behind pre-pandemic levels. Foreclosure activity stands about 70% below September 2019 and 60% lower than 3Q 2019, according to Rick Sharga, executive vice president at Attom affiliate RealtyTrac. The increased activity will likely continue going forward as a large share of forbearance plans terminate.

“There are hundreds of thousands of borrowers scheduled to exit forbearance in the next two months, and it’s possible that we might see a higher percentage of those borrowers default on their loans,” Sharga said in the report.

At the state level, California had the most foreclosure starts in 3Q with 3,434, followed by Texas with 2,827, Florida with 2,546, New York with 1,363 and Illinois with 1,362. Among the 220 housing markets Attom tracked, the most starts came in New York with 1,456, Chicago with 1,122, Los Angeles with 1,102, Miami with 992 and Houston with 866.

Repossessions through completed foreclosures totaled 7,574 in the third quarter, marking rises of 22% quarterly — the first quarterly jump since 1Q 2016 — and 46% annually. September also saw gains in real estate owned properties, as it 2,682 increased 8% monthly and 33% year-over-year. Illinois had the most REOs in the quarter with 965, trailed by 564 in Florida and 480 in Pennsylvania.