FORECLOSURE TRENDS AND RESEARCH

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1 FORECLOSURE TRENDS AND RESEARCH Forum on Foreclosures in Massachusetts CHAPA & MassHousing July 17, 2012 Presented by Timothy Warren Jr. CEO and Publisher The Warren Group

2 Agenda Massachusetts Foreclosure Activity Trends from 2007 to present Foreclosures by town Research Foreclosure Monitor LPS Mortgage Monitor Federal Reserve Bank of Boston Foreclosure Outlook

3 Mass. Foreclosure Activity

Massachusetts Foreclosure Activity All Property

5 Mass. Monthly Petitions to Foreclose ,500 3,000 2,500 2,000 1,500 1, Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Copyright 2012 The Warren Group

Massachusetts Foreclosure Stats All Property Types Petitions to Foreclose: 2009 2010 27,923 23,931-14% 2010 2011 23,931 12,634-47% Jan.-May 2011 Jan.

7 Massachusetts Foreclosure Stats All Property Types Petitions to Foreclose: ,923 23,931-14% ,931 12,634-47% Jan.-May 2011 Jan.-May ,425 7, % Foreclosure Deeds: ,271 12, % ,238 8,528-30% Jan.-May 2011 Jan.-May ,846 3, %

8 Foreclosure Trend Analysis Foreclosure activity has increased in 2012 in year-to-year comparisons Petitions Jan-May 2012 are 77% higher than 2011 Deeds Jan-May 2012 are 31% higher than 2012 Current activity levels are well below their peak levels Petitions are running 1564/mo in 2012 vs. 2464/mo in 2007 Deeds are running 747/mo in 2012 vs. 1036/mo in 2008 The aberrant year was 2011 big slowdown Right to cure extended to 150 days Bad publicity and political pressure caused lenders to go slow Court decisions and legal challenges Lender caution and extra effort clogged lender pipelines

9 Foreclosures by town

10 Foreclosure Trend Comparison Communities with largest decline since 2006* % Change Jamaica Plain % Dorchester % Marshfield % Westport % Mattapan % Canton % Note: Towns with 20+ foreclosure petitions

11 Foreclosure Trend Comparison Communities with largest increase since 2006* % Change Acushnet % Nantucket % Douglas % Rockland % Winthrop % Milford % Note: Towns with 20+ foreclosure petitions

12 The 10 Communities with Highest Foreclosure Petition Rate In Lawrence 8% 1.9% 1.1% Dorchester 5.9% 1.2% 0.7% Mattapan 5.9% 1.5% 0.6% Brockton 5.5% 2% 1.2% Chelsea 4.9% 1.2% 1% Lynn 4.4% 1.3% 0.9% Springfield 4.2% 1.5% 0.9% Revere 4% 1.3% 0.7% Fitchburg 3.9% 1.5% 0.9% Everett 3.8% 1.1% 0.6% Note: Towns with 2,000+ parcels petitions/parcels * 2012 stats thru May

13 The 10 Communities with Highest Foreclosure Petition Rate In Athol 3.4% 1.5% 1.3% Brockton 5.5% 2% 1.2% Carver 3% 1.5% 1.1% Lawrence 8% 1.9% 1.1% Chelsea 4.9% 1.2% 0.98% Southbridge 3.3% 1.2% 0.96% Templeton 2% 1.2% 0.92% Oxford 2% 0.98% 0.91% Winchendon 3% 1.6% 0.9% Springfield 4.2% 1.5% 0.9% Note: Towns with 2,000+ parcels petitions/parcels * 2012 stats thru May

14 Research

15 MHP Foreclosure Monitor 2.6 (May 2012) In a study published in Foreclosure Monitor, Tim Davis found that: Foreclosure distress remains highest in Bristol, Plymouth and Worcester counties In a study of the 30 communities that are in highest states of distress, 21 had a decline in distress from April 2011 to April 2012 Worcester and Lawrence were among the cities with the largest decline in distress Boston ranked of 151 of 292 municipalities in rate of distress There is a slow shift of foreclosure distress from Boston and urban gateway cities to suburban/rural communities Brockton and Springfield continue to have high levels of distress

16 LPS Mortgage Monitor June 2012 In non-judicial states the percentage of non-current mortgages are declining faster than in judicial states In MA non-current loans are 9.7% vs. 11.3% nationally New problem loans (ones that were current 6 months ago but are now seriously delinquent) continue to decline, raising hope for pipeline relief 90-day defaults have held lower than foreclosure starts for the last three months running, raising hope for fewer starts in the future

17 Federal Reserve Bank of Boston Paul Willen and other research economists at the Fed have published papers recently with these findings: The 90-day right-to-cure law had no impact on distressed borrowers ability to cure their mortgage default or to obtain a modification. Distressed properties have a very small negative effect (less than 1%) on the value of other properties in close proximity (less than 0.1 mile), but those effects peak before the foreclosure process is complete. Condos in proximity to a foreclosed condo suffer a greater decline in value. This is especially true for condos in the same condo association as a foreclosed condo. A decline of 2.6% in value has been shown in associations that have an REO condo. The sale of a REO condo in the same association results in a 4.9% decline in value.

18 Foreclosure Outlook

19 National Mortgage Delinquencies Nationally mortgage delinquencies are falling May % May % May % 26% decline in the percentage of loans that are delinquent in a two-year period 11.3 % of loans are non-current, down 6.3% in one year *Source: Lender Processing Services

20 Massachusetts Mortgage Delinquencies Mass. mortgage delinquencies falling 7.3% of homeowners behind on their mortgage in Q1 a decrease of 87 basis points from Q Bay State ranked 16th in delinquencies and 36th in foreclosures started In May 2012, MA delinquencies were 7.2%, same as national average In May 2012, 9.7% of MA mortgages were non-current 2.0% decline from one year ago Non-current mortgage percentage in MA was 14.1% below national average *Source: Lender Processing Services & Mortgage Bankers Association

21 Employment Massachusetts unemployment rate improving May 2012: 6.0% (added 7,500 jobs) Lowest since Sept Peak: Oct Feb (8.7%) May unemployment rate is down 4.8% from April May unemployment rate is down 18.9% from previous May Bay State better than national unemployment rate of 8.2% *Source: U.S. Bureau of Labor Statistics

22 Forecast Petitions to foreclose have remained below 2,000 per month for nearly 2 years. Likely to continue in the 1,500-2,000 range. Given the delays in mortgage processing in 2011, comparisons with prior year will continue to show sharp increases. Not cause for concern. Foreclosure deeds have remained below 1,000 per month for nearly 2 years. Likely to continue in the 750-1,000 range. Clear and substantial improvements in unemployment, job creation, mortgage delinquency rates and the real estate market give optimism for lower levels of foreclosure activity in 2013 than in Increased levels of refinance under HARP 2.0, more loan modifications under the HomeCorps program and short sales of underwater homes encouraged by rising real estate market all have potential to reduce future foreclosure activity. Loan Modification Bill now in conference committee at State House could reduce foreclosure starts through forced principal reductions.

23 Thank you! Questions? Tim Warren

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