The housing bubble burst 10 years ago, but loans from that era of go-go lending are still accounting for about half of foreclosures, a Los Angeles data firm reported Thursday.
The U.S. foreclosure rate was 0.7% in 2016, slightly lower than 2015, and remaining “within an historically normal range for the third consecutive year,” according to Daren Blomquist, senior vice president at ATTOM Data Solutions.
Its U.S. Foreclosure Market Report showed that foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 933,045 properties in 2016, down 14% from 2015 to the lowest level since 2006.
The housing bubble formed from the early 2000s to 2006, fueled in part by speculation by housing flippers and overly zealous lending, especially through subprime loans that were repackaged and sold as complex securities to investors.
Foreclosures began rising sharply in 2006 and by 2008 helped precipitate the financial crash. Even in 2016, 55% of all active foreclosures nationwide were on loans originated between 2004 and 2008, down from about 75% just a few years earlier.
“The banks have slowly been chipping away at that backlog,” Blomquist said.
The states with the highest foreclosure rates tend to be those with the highest rates of bubble-legacy loans. Those states also tend to have the strictest regulations “designed to protect homeowners against improper foreclosures, but also having the effect of protracting the foreclosure process,” Blomquist said.
The top 10 highest foreclosure rates in 2016 were New Jersey (1.86%), Delaware (1.51%), Maryland (1.37%), Florida (1.18%), Illinois (1.10%), Nevada (1.09%), South Carolina (0.92%), Connecticut (0.91%), Ohio (0.89%) and New Mexico (0.78%).
A total of 478,857 properties started the foreclosure process in 2016, 16% fewer than 2015 and down 78% from the peak of 2,139,005 foreclosure starts in 2009.
Counter to the national trend, 15 states and Washington, D.C., posted an increase in foreclosure starts in 2016, including Delaware (up 37%), Connecticut (up 35%), Maine (up 30%), Rhode Island (up 26%), Arizona (up 15%) and Massachusetts (up 12%).
