Repeat Foreclosures Now Account for More Than Half of Total

Black Knight Financial Service’s current Mortgage Monitor Report takes an in-depthrnlook at home affordability and foreclosure metrics, both based on January 2015rndata.  The company says that foreclosurernstarts, both first time and repeat, reached 12 month highs during the monthrnwhile home affordability, despite two years of price increases, remains betterrnthan before the housing bubble. </p

The Monitor reportsrnthat continued low interest rates have helped to offset price increases and thatrnnationally the mortgage-to-income ratio stands at 21 percent.  In the 2000-2002 period, before prices beganrnto skyrocket, the average ratio was 26 percent. rnStill, the current ratio is up from October 2012 when it bottomed out atrn17.6 percent.  The ratio peaked in Julyrn2006 at 34.7 percent.</p

The high mortgage-to-income ratio during the bubble yearsrncorrelates, Black Knight points out, to a similar rise during that period with thernuse of interest only and negative amortization loans.  The use/availability of those products werernrare in the pre-bubble years and are virtually negligible today. </prn

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There are, of course, varying levels of affordability acrossrnthe country.  Washington, DC; Hawaii andrnCalifornia are the least affordable locations while Indiana, Michigan, and Iowarnhave the most homes that are affordable to households earning a median monthlyrnincome.  </p

In Washington the current payment-to-income ratio is 40rnpercent, nearly twice the national average but well below the 62 percent thernDistrict reached at the peak.  In Hawaiirnthe ratio is just over 35 percent and it is 32.5 percent in California.  In contrast the ratios in Indiana, Michiganrnand Iowa are 12.6, 13.3, and 13.5 respectively. </p

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In Washington, DC; Hawaii, and Alaska (currently at 21.1rnpercent) the ratios are already higher than in the pre-bubble years andrnCalifornia is nearing that point.  Thernrecovery has been far less in Illinois and Mississippi where ratios are morernthan 10 percent below those 2000-2002 averages.</p

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Black Knight said that a one percent increase in interestrnrates would push California and an additional seven states (Maryland, Delaware,rnNew York, Montana, North Dakota, and Wyoming) above pre-bubble levels.  Atrnthe national level, home prices could rise another 25 percent, or interestrnrates could jump almost two percent, before the affordability ratio would reachrnpre-bubble levels. </p

Interest rates aside,rnhowever, Black Knight points out that affordability ratios are more favorablernin those states where income has kept pace with home price increases.  For example, in Illinois the payment tornincome level is 11 percent below 2000-2002 levels.  There median household income has increasedrnby 27 percent since that period while home prices are up 11 percent.  On the other hand, income in Washington, DCrnhas risen 50 percent while home prices are up 141 percent and the 26 percent increasernin median income in Hawaii does not offset the 125 percent increase in homernprices.  </p

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In its closerrnexamination of January foreclosure data Black Knight said there was clearrnseparation in the levels of increase by first time and repeat foreclosure startsrnin reaching their 12-month highs.  Therernwas also a continuation of the differences seen across multiple foreclosurernindicators between judicial and non-judicial states.</p

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Trey Barnes, BlackrnKnight’s senior vice president of Loan Data Products said, “Repeat foreclosurernstarts made up 51 percent of all foreclosure starts and increased 11 percent</bfrom December. In contrast, first-time foreclosure starts were up just arnfraction of a percent from the month prior. Similarly, Black Knight found thatrnJanuary foreclosure starts jumped about 10 percent from December in judicialrnstates as compared to just a 1.7 percent increase in non-judicial states.rnJudicial states are also seeing higher levels of both new problem loans andrnserious delinquencies (loans 90 or more days delinquent, but not yet inrnforeclosure) than non-judicial states, although volumes are down overall inrnboth categories."</p