TRENDS IN DELINQUENCIES AND FORECLOSURES IN ARIZONA April 2009 Jan Bontrager, Community Development Department, Federal Reserve Bank of San Francisco
Outline of Presentation National Trends Rising foreclosures House price declines Rising unemployment Arizona Trends in foreclosure Housing market softening Rising unemployment Scale of loan modifications still falls short of need
National Trends
National Trends Foreclosures rose steadily in 2008, with wide repercussions for US economy After a slight decline in the national foreclosure rate in the 3 rd Quarter of 2008, rose again in 4 th Quarter Factors driving foreclosures nationally House price declines Rising unemployment, coupled with turmoil in financial and credit markets, may further influence foreclosure rate going forward
National Foreclosure Starts Rose Slightly in 4th Quarter of 2008 1.20 National Foreclosures Starts Percent of All Loans 1.00 0.80 0.60 0.40 0.20 0.00 2000 2002 2003 2004 2005 2006 2007 2008 Source: Mortgage Bankers Association, National Delinquency Survey, 4th Q 2008
Nationally, House Prices Continue to Decline 200 Case-Shiller National House Price Index (2000 = 100, quarterly) 180 160 140 120 100 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: Case - Shiller Home Price Index, 4 th Q 2008
Recession Marks Significant Jump in Unemployment U.S. Unemployment Rate 12 10 Unemploymen nt Rate 8 6 4 2 0 1989 1993 1997 2001 2005 2009 Recession Unemployment Rate Source: Bureau of Labor Statistics
Ai Arizona Trends
Foreclosures in Arizona are Twice the National Average 3 Foreclosure Starts (Percent of All Loans) 2.5 2 1.5 1 0.5 0 Alaska Washington Oregon Utah Idaho Hawaii US California Arizona Nevada 4Q 2005 4Q 2006 4Q 2007 4Q 2008 Source: Mortgage Bankers Association, National Delinquency Survey, 4 th Q 2008
Unlike National Trends which seem to be Slowing, Arizona Continues to See Rising Foreclosure Rates 2.5 Arizona Foreclosure Starts (Percent of All Loans) Foreclosure Sta arts (Percent of Loans) 2.0 1.5 1.0 0.5 0.0 2005 2006 2007 2008 Source: Mortgage Bankers Association, National Delinquency Survey, 4 th Q 2008
Arizona Has Seen Dramatic House Price Declines Since the Peak of Housing Boom 220 FHFA (formerly OFHEO) House Price Index (2000=100, quarterly) 200 FHFA House Price Index 2000 0=100 180 160 Arizona United States 140 120 100 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: Federal Housing Finance Agency (formerly OFHEO), 4 th Quarter 2008
Phoenix Experiencing Greatest Declines in House Values 240 FHFA (formerly OFHEO) House Price Index (2000 = 100) 220 Flagstaff FHFA House Price Index 2000 0=100 200 180 160 Tucson Yuma Phoenix-Mesa 140 120 100 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: Federal Housing Finance Agency (formerly OFHEO), 4 th Quarter 2008
Arizona s Foreclosures Remain Concentrated in Subprime ARM Market, though Subprime Fixed and Prime ARM also Risingi 10.0 Foreclosure Starts by Loan Type 9.0 8.0 Percent of Fore eclosure Starts 7.0 6.0 50 5.0 4.0 3.0 2.0 1.0 0.0 2005 2006 2007 2008 Prime Fixed Prime ARM Subprime Fixed Subprime ARM Source: Mortgage Bankers Association, National Delinquency Survey, 4 th Q 2008
Arizona Saw High Rates of High-Cost Lending During Subprime Boom 35% Percent of All Borrowers with High Interest Conventional Loans, 2005 30% 25% 22.7% 23.1% 23.6% 24.3% 25.9% 27.3% 28.0% 28.1% 29.2% 20% 20.4% 15% 10% 5% 0% Hawaii Alaska Oregon Washington Idaho California USA Arizona Utah Nevada Source: Home Mortgage Disclosure Act Data, 2005
High Cost Lending in Arizona More Prevalent Among Minority Groups, Especially Latinos 60% High Cost Conventional Loans by Race, 2005 50% 40% 30% 20% 10% 0% All borrowers White borrowers Asian/Pacific Islander borrowers Black borrowers Native American borrowers Hispanic/Latino borrowers Source: Home Mortgage Disclosure Act Data, 2005
Unemployment Rate in Arizona is Rising 9.0 Unemployment Rate 8.0 7.0 Unemploymen nt Rate 6.0 50 5.0 4.0 3.0 Arizona United States 2.0 1.0 0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: Bureau of Labor Statistics, March 2009
Employment Trends by Industry in Arizona Total Employed (thousands) Percent Change Arizona Feb 09 1 mo.* 3 mo.* 12 mo. Total 2,480.9 11.5 11.5 6.7 Trade, Transportation & Utilities 483.9 5.55 11.22 8.22 Government 431.7 15.0 3.8 1.1 Professional & Business Svcs. 356.3 5.2 13.9 10.9 Educational & Health Srvs. 316.9 5.9 59 6.4 64 09 0.9 Leisure & Hospitality 257.7 11.3 6.0 6.1 Financial Activities 171.2 9.9 6.1 4.0 Manufacturing 166.11 12.1 1 14.8 8 6.4 64 Construction 149.1 41.0 39.0 26.8 Other Services 95.8 4.9 14.8 5.1 Information 39.99 21.22 10.33 6.33 Natural Resources & Mining 12.3 25.1 35.0 4.7 Source: Bureau of Labor Statistics, February 2009, *Annualized
Significant Drop in Construction Employment 20 Construction Employment (percent change, year-over year) 15 10 5 United States 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009-5 -10 Arizona -15-20 -25-30 Source: Bureau of Labor Statistics, March 2009
Significant Drop in Financial Activities Employment 10 Financial Activities Employment (percent change, year-over year) 8 6 4 2 United States Arizona 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009-2 -4-6 Source: Bureau of Labor Statistics, March 2009
Ai Arizona Foreclosure Data Maps
Arizona Data Maps Distribution of Lending Volumes September 2007 Source: Lender Processing Services Inc. Applied Analytics & FRBSF Calculations, September 2007
Arizona Data Maps Areas Affected by Concentrated Foreclosures September 2007 Source: Lender Processing Services Inc. Applied Analytics & FRBSF Calculations, September 2007
Arizona Data Maps Areas Affected by Concentrated Foreclosures April 2008 Source: Lender Processing Services Inc. Applied Analytics & FRBSF Calculations, April 2008
Arizona Data Maps Areas Affected by Concentrated Foreclosures November 2008 Source: Lender Processing Services Inc. Applied Analytics & FRBSF Calculations, November 2008
Arizona Data Maps Areas Affected by Concentrated Foreclosures February 2009 Source: Lender Processing Services Inc. Applied Analytics & FRBSF Calculations, February 2009
Phoenix Data Maps Areas Affected by Concentrated Foreclosures February 2009 Source: Lender Processing Services Inc. Applied Analytics & FRBSF Calculations, February 2009
Phoenix Data Maps Areas with Concentrations of REO Properties February 2009 Source: Lender Processing Services Inc. Applied Analytics & FRBSF Calculations, February 2009
Phoenix Data Maps Areas at Risk of Additional Foreclosures February 2009 Source: Lender Processing Services Inc. Applied Analytics & FRBSF Calculations, February 2009
Tucson Area Data Maps Areas Affected by Concentrated Foreclosures February 2009 Source: Lender Processing Services Inc. Applied Analytics & FRBSF Calculations, February 2009
Oregon Tucson Area Data Data Maps Maps Areas with Concentrations of REO Properties February 2009 Source: Lender Processing Services Inc. Applied Analytics & FRBSF Calculations, February 2009
Tucson Area Data Maps Areas at Risk of Additional Foreclosures February 2009 Source: Lender Processing Services Inc. Applied Analytics & FRBSF Calculations, February 2009
Loan Modifications as Share of Loan Workouts Have Increased 8,000 Arizona Loan Workouts 7,000 r Hope Now Servic cers) Nu umber (Adjusted fo 6,000 5,000 4,000 3,000 2,000 1,000 0 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Repayment Plans Loan Modifications Source: Hope Now Alliance Servicing Data, 4 th Quarter 2008
Yet, Workouts Still Fall Short of Need 70,000 Foreclosure & Delinquencies v. Loan Workouts in Arizona 4th Quarter 2008 60,000 (Adjusted for Hope Now Servicers) Number 50,000 40,000000 30,000 20,000 10,000 0 Serious Delinquencies Foreclosure Starts Foreclosure Sales Repayment Plans Loan Modifications Source: Hope Now Alliance Servicing Data, 4 th Quarter 2008
Conclusions
Conclusions Multi-pronged strategy is needed to stem foreclosure crisis Continued foreclosure prevention efforts are critical Foreclosure Prevention: Borrower Outreach, Refinance and Loan Modification (including principal reduction) Reaching these borrowers now may help to prevent unnecessary foreclosures Encourage borrowers to contact t the Hope Hotline by calling (888) 995-HOPE or visiting www.995hope.org
Conclusions Other strategies that can help to mitigate the negative impacts of foreclosure on families and neighborhoods Addressing vacant properties: ensuring that servicers maintain properties REO property disposition: return REO properties into productive use, affordable housing Ensuring continued access to credit and homeownership: credit repair, financial education, responsible lending
For More Information: FRBSF Community Development elopment Website Links to other resources and research on foreclosure trends and mitigation strategies All publications, presentations available on our website Conference materials also posted shortly after events http://www.frbsf.org/community/