The pandemic’s impact on foreclosure risk became more acute in some regions during the third quarter.
Even as coronavirus case numbers decrease, it still poses a “significant threat to the economy, with some housing markets in pockets of the country remaining at higher risk than others,” Todd Teta, Attom’s chief product officer, said in the report.
Nearly half of the 50 counties most vulnerable to foreclosure, including the entire top 9 and 14 of the top 20, were in New Jersey and Illinois, according to Attom Data Solutions’ special coronavirus report. The report measures risk based on a mix of home affordability, properties underwater and foreclosure filings in each area.
Florida and North Carolina were the only other states with more than two counties in the top 50, with four and three, respectively. Conversely, years of leading the country in home price appreciation kept Western markets insulated. Only two counties in the top 50 were in the West: California’s Shasta at No. 31 and Humboldt at No. 50.
Sussex County, N.J., ranked as the market facing the most distressed mortgage risk in the nation. In that county, a 36.9% share of income is needed to buy a median-priced home, 18.1% of properties were underwater as of the second quarter and about 0.06% of borrowers in the county filed for foreclosure in the third. Kendall County, Ill., placed second with metrics in those same categories of 39.5%, 11.7% and 0.11%, respective. McHenry, Ill., followed with affordability and housing measures in line with the previous ones of 34.6%, 15% and 0.08%.
Overall, foreclosure starts grew 32% in the third quarter from the second and 67% year-over-year, according to a separate Attom report from Oct. 14. That could be a trend going forward with federal protections now expired and borrowers exiting forbearance at high rates.
“I expect to see three small waves of foreclosure activity as we exit the moratorium and forbearance program: one this fall, which will mostly be loans that were in foreclosure prior to the pandemic; one in the first quarter of 2022 when the new CFPB servicing rules (and holiday moratoria) expire; and another in the summer, when almost everyone will have exited the forbearance program and servicers will have exhausted loss mitigation options with most borrowers,” Rick Sharga, executive vice president at Attom affiliate RealtyTrac, said in a statement to NMN. “Even with those waves, I don't expect we'll see foreclosure activity get back to normal levels until late in 2022.”
