Magazine article Economic Trends

Recent Fourth District Foreclosure Trends

Magazine article Economic Trends

Recent Fourth District Foreclosure Trends

Article excerpt

Foreclosure rates among Fourth District states remain at or near historic highs. Outside of West Virginia, which has seen its rate remain elevated but stable, these rates have continued to trend up since the recovery began in the second quarter of 2009.

This pattern differs noticeably from trends in the so-called sand states--Arizona, California, Florida, and Nevada. These states saw among the largest increases in foreclosure rates following the nationwide bust in housing market activity around 2005; however, since mid-2009, with the exception of Florida, foreclosure rates in the sand states have fallen sharply.

The declines have been so significant that Arizona and California, which had the nation's third-and fourth-highest foreclosure rates in the second quarter of 2009, respectively, had the thirteenth-and seventeenth-highest rates, respectively, two years later. By contrast, Ohio has continued to have one of the nation's highest state foreclosure rates--re-maining in the top ten--while Kentucky and Pennsylvania have each seen their rankings worsen, from twenty-second-to fifteenth-worst for Kentucky and twenty-ninth-to twenty-fifth-worst for Pennsylvania.

What accounts for this divergence? Broadly speaking, states can use two different kinds of processes for resolving foreclosures, and these differences appear to be behind the differing patterns of recent foreclosure-rate changes. One approach, judicial, requires that a foreclosure proceed through the courts. Another approach, nonjudicial, is handled outside of court, generally by a third-party trustee who, at the time the loan was originated, was given the power to sell the property under certain conditions. States may employ one or both of these processes.

Judicial foreclosure timelines tend to be longer under normal circumstances. But they are also prone to getting even longer if courts face a flood of foreclosures, as has happened in the last several years. …

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