Editorial
Front Page - Monday, October 26, 2009
What is RealtyTrac actually reporting?
Ethan C. Nobles
Special to the Daily Record ecnobles@att.net
According to the RealtyTrac U.S. Market Foreclosure Report, foreclosures across the nation were up 23 percent in the third quarter as compared to the same period of time in 2008.
The RealtyTrac report states that one in every 136 homes in the U.S. was in foreclosure in the third quarter. In Arkansas, the rate was one in every 249 homes.
According to the report, there were 5,178 homes in foreclosure in Arkansas in the third quarter – up 39.61 percent from a year ago. However, a RealtyTrac official confirmed that the company counts every step in the foreclosure process as an incident of foreclosure.
In other words, it is inaccurate to say that 5,178 homes were taken back by lenders. It is, however, accurate to say that 5,178 homes entered at least one step of foreclosure.
In Arkansas, there are essentially judicial and non-judicial foreclosures. A judicial one involves a complaint being filed against the borrower and the matter is settled in court. A non-judicial one involves a borrower taking the steps necessary to take back a property, leaving the homeowner having to affirmatively file in court to have the matter transferred there.
Susan Purtle, an attorney with the Arkansas Legal Aid office in Fayetteville, said non-judicial foreclosures are much more common in Arkansas. When it comes to non-judicial foreclosures, there are a few steps that lenders must observe. First of all, a notice of default and intention to sell is recorded at the county courthouse and sent to all involved parties. After that is filed, the property can’t be sold for 60 days.
If the matter is not resolved, then the property is sold through auction. If no one bids in the auction then the property is taken back by the bank and sold as a real estate owned property (REO).
Along the way, RealtyTrac counts each step in the process as a foreclosure. If an agreement is reached with the lender, then the property is still listed as one in foreclosure by RealtyTrac even if the buyer still retains possession of the property.
Kathy Deck, director of the Center for Business and Economic Research at the University of Arkansas, said RealtyTrac is still comparing “apples to apples” for the most part, so that increase in foreclosures is still a concern.
She said Arkansas was fortunate when the first wave of subprime foreclosures started to hit a couple of years ago. Because home prices never got to the level where people had to take radical measures to buy houses, there simply weren’t as many subprime mortgages issued in the Natural State.
Still, a lot of builders took a hit in that first wave of foreclosures. Deck said a lot of them couldn’t keep on the loans on homes they had built but couldn’t sell, so they had to turn them over to the lenders.
A pressing concern now has to do with high unemployment rates, Deck said. Arkansas’ unemployment rate of 7.1 percent in August represents a considerable jump over the 5.1 percent rate reported a year earlier.
When people lose their jobs and can’t find new ones, Deck said you’re looking at a situation where an increase in foreclosures is common. Also, there’s the adjustable rate mortgage to consider – there were plenty of those issued in Arkansas and many of them required either nothing or very little in the way of a down payment.
When home values declined and people had little equity built up in them, you’ve got a recipe for foreclosure when you throw in a high unemployment rate.
A decreasing unemployment rate, then, is one of the keys to cutting down on the number of foreclosures in a given area. As long as the unemployment rate is climbing or remains high, Deck said foreclosures will be common, too.
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