Rise in mortgage foreclosures reflects unemployment, COVID-19 woes

While moratoria have kept foreclosures low compared to last year's rates, October activity jumped 20% from September, according to Attom Data Solutions.

Foreclosure filings — inclusive of default notices, bank repossessions and scheduled auctions — totaled 11,673, up month-over-month from 9,707 but down 79% year-over-year from 55,197.

One in every 11,683 mortgaged properties reached a point in the foreclosure process in October. South Carolina had the highest foreclosure ratio, with one in every 6,133 units. It was trailed closely by Nebraska's one in 6,246 and Alabama's one in 6,660.

Broken down by housing markets with populations above 1 million, Birmingham, Ala., posted the worst rate, at one in every 1,993 properties. Cleveland followed at one in 4,511, then came Jacksonville, Fla., with one in 5,119 units.

"It's probably not a surprise that almost all of the metro areas where foreclosure activity increased on a month-over-month basis are also places where unemployment rates are higher than the national average, and in many cases have been hotspots of COVID-19 infections," Rick Sharga, executive vice president at RealtyTrac, said in the report.

Among metro areas with over 1 million people, New York led with 485 foreclosure starts, followed by 240 in Chicago, 196 in Los Angeles, 151 in Miami and 143 in Houston.

Foreclosure starts moved almost identically with the foreclosure rate overall, spiking 21% month-over-month to a total of 6,042 nationwide while falling 79% from October 2019. North Carolina led all states with a 294% monthly rise in starts, followed by 74% in Ohio 74% and 30% in Illinois.

Similarly, banks repossessed 2,577 properties in October, an increase of 28% from September while dropping 81% year-over-year.

While Sharga was surprised that activity rose despite the moratoria, some of the increases were credited to properties that were already in the stages of default or were zombie properties before the pandemic took hold.

Managing the coronavirus-related distress of the housing market and getting borrowers the necessary aid stands as a major issue for President-elect Joe Biden and his administration to address.

"There's some near-term things they will have to tackle with COVID relief," Chris Morton SVP of public affairs at American Land Title Association, said in an interview. "A critical one is ensuring folks continue to have opportunities to stay in their homes and receive assistance to get through the economic challenges. There is broad agreement that something further needs to be done, the question just becomes the scope of that. Having had a number of conversations with both sides up on the Hill, there is a recognition of the stress that both the real estate sector and consumers are under."