Washington, D.C.–Serious mortgage delinquency rates are at near historically high levels, according to data released today by Foreclosure-Response.org, a joint project of the Local Initiatives Support Corporation (LISC), Urban Institute and the Center for Housing Policy. If there’s a silver lining in this bleak news, its greatest beneficiary will likely be the multifamily housing industry, which is certain to profit from growing ranks of renters.
The Federal Housing Finance Agency, however, is seeking input about renting single-family homes and condos owned by Fannie Mae, Freddie Mac and/or the Federal Housing Administration, which could, theoretically, hinder the conventional apartment market. Current options include allowing homeowners to rent out the homes, for current renters to lease to own or for private investors to manage the rental properties. The deadline for input is Sept. 15.
“I think, overall, the serious delinquency rates have been improving slightly,” Leah Hendey, research associate with Washington, D.C.-based non-profit, non-partisan policy research organization Urban Institute, tells MHN. “But they still stand at near-historic highs. We’re still a long way from where we need to be. More people are going to become renters, and that could increase rental demand in some areas. We’ve already seen nationally that homeownership numbers have declined, [which] does put more people in the rental market.”
But the still-high foreclosure figures don’t translate to opportunity only for the multifamily industry, she adds. “It’s also creating opportunities for homeownership among those who weren’t homeowners before. [Home] prices are lower in some places and relatively more affordable than they have been.”
As Hendey indicates, the report shows a welcome stabilization of rates of serious mortgage delinquency, meaning the share of loans in foreclosure plus the share of loans delinquent for 90 or more days. Serious delinquency dropped 10 percent from the December 2009 peak through March 2011. And the 90-plus day delinquency component of the above figure fell over the same period from 5.5 percent to 3.9 percent of the mortgage market.
However, the share of homes in foreclosure grew 12 percent over that time.
Asked how long she believes it will take the market to absorb the foreclosures, Hendey predicted several years. Why the delay? She cited as an example the state of New York, where the foreclosure process takes an average of approximately 900 days to complete. “It affects communities if the process is prolonged and these homes can’t be turned back to productive use,” she says. In addition, the flagging economy has not provided a climate conductive to eliminating the mess. “There’s a relationship between unemployment and serious delinquencies,” Hendey says. “It’s not a perfect relationship given what we see in Miami and Las Vegas, where you’d expect unemployment to be higher based on the rates of foreclosure. But as people lose their jobs, more and more of them have difficulty paying their mortgages, not just sub-prime but prime.”
While a slowed foreclosure process perpetuates the housing woes, the other extreme isn’t a panacea either. Pursuing foreclosures too quickly can result in short-circuiting efforts to save homes, according to Hendey. “There needs to be time for borrowers to negotiate loan modifications,” she says.