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Anatomy of a Foreclosure Start in 3 States

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A recent uptick in foreclosure starts involves mostly homeowners far behind on their mortgage payments and deeply underwater on their mortgages.

That conclusion comes from an analysis of properties starting the foreclosure process in the second quarter of 2012 in three fairly disparate housing markets: Nevada, Illinois and Washington. I did this analysis for my quarterly “DataDecoded” column in the September issue of the Scotsman Guide magazine. Read the full column.

What I found was that while the average age, size and market value of properties starting the foreclosure process varied substantially across these three states, the common thread was an astronomically high average loan-to-value ratio: 324 percent in Nevada; 177 percent in Illinois; and 156 percent in Washington.


Nevada

Illinois

Washington

Avg Default Amount

 $    25,180

 N/A

 $        46,858

Avg Loan Amount

 $  295,572

 $  221,649

 $      263,124

Avg LTV Percent

324

177

156

Avg Estimated Market Value

 $  127,381

 $  147,519

 $      215,379

Avg Year Built

1996

1955

1973

Avg Square Footage

2,003

1,750

1,618

Avg Opening Bid

 N/A

 N/A

 $      176,071

In addition, the average default amount in Nevada and Washington (this is a number not available on the public foreclosure documents in Illinois) show that homeowners starting the foreclosure process are already in a deep hole. The default amount is the dollar amount the homeowner/borrower is behind on monthly mortgage payments when the property starts foreclosure.

In Nevada, the average default amount on properties starting the foreclosure process in the second quarter was more than $25,000, 18 months of missed payments based on the average loan amount of $295,572 and estimating mortgage payments based on a 30-year fixed loan at 4 percent interest.

In Washington, the average default amount of $46,858 calculates out to an estimated 37 months of missed mortgage payments based on an average loan amount of $263,124.

Since I wrote originally wrote the column, foreclosure starts actually dipped back down in the month of August —although they continued to increase in Illinois skyrocketed in Washington — following three straight months of year-over-year increases. But I would expect to see more waves of foreclosure starts come through in the coming months as lenders continue to play catch-up with seriously delinquent homeowners.

Do you agree or will the mortgage settlement siphon off most of the seriously delinquent mortgages into a loan modification, short sale or some other foreclosure alternative?

Related News
Foreclosure Starts Increase for Third Straight Month in July
Why Seattle Foreclosure Activity Surged in August
Foreclosure Cease Fire Could Be Ending in Maryland


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