TRENDS IN DELINQUENCIES AND FORECLOSURES IN UTAH January 2009 Jan Bontrager, Community Development Department, Federal Reserve Bank of San Francisco
Outline of Presentation National Trends Rising foreclosures House price declines Rising unemployment Utah 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 A slight decline in the national foreclosure rate in the 3 rd Quarter of 2008 Factors driving foreclosures nationally House price declines Rising unemployment, coupled with turmoil in financial and credit markets, may further influence foreclosure rate going forward
After Steady Rise, National Foreclosure Starts Dipped Slightly in 3 rd Quarter of 2008 1.20 National Foreclosure Starts (Percent of all loans) 1.00 0.80 Percent of All Loans 0.60 0.40 0.20 0.00 2001 2002 2003 2004 2005 2006 2007 2008 Source: Mortgage Bankers Association, National Delinquency Survey, 3 rd 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, 3 rd Q 2008
Recession Marks Significant Jump in National Unemployment Insurance Claims 050 0.50 National Unemployment Insurance Claims, Percent Change Year-over-Year 0.40 0.30 0.20 0.10 0.00 2000 2001 2002 2003 2004 2005 2006 2007 2008-0.10-0.20-0.30 Source: Haver Analytics and FRBSF Calculations, annual percent change, 2000 Q3-2008 Q3
Utah Trends
Foreclosures in Utah Have Risen Significantly, but Still Below US Average 3.00 2.50 Foreclosure Starts (Percent of All Loa ans) 2.00 1.50 1.00 0.50 0.00 Alaska Washington Oregon Hawaii Utah Idaho US California Arizona Nevada 3Q 2005 3Q 2006 3Q 2007 3Q 2008 Source: Mortgage Bankers Association, National Delinquency Survey, 3 rd Q 2008
Yet Unlike National Trends, Utah Saw a Continued Increase in Foreclosure Starts in 3 rd Quarter 2008 0.8 Utah: Foreclosure Starts 0.7 0.6 Loans Percent of All 0.5 0.4 0.3 0.2 0.1 0.0 2005 2006 2007 2008 Source: Mortgage Bankers Association, National Delinquency Survey, 3 rd Q 2008
Housing Boom in Utah Started Later than US, but Now Seeing Softening of Real Estate Market 170 FHFA House Price Index (formerly OFHEO) (2000=100, quarterly) 160 FHFA House Price Index 2000 0=100 150 140 130 United States Utah 120 110 100 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: Federal Housing Finance Agency (formerly OFHEO), 3 rd Quarter 2008
St. George and Salt Lake City Experiencing Greatest Declines in House Values 200 FHFA House Price Index (formerly OFHEO) (2000=100) 180 St. George FHFA House Price Index 2000 0=100 160 Salt Lake City 140 Logan 120 100 2000 2001 2002 2003 2004 2005 2006 2007 2008 St. George Salt Lake Logan Source: Federal Housing Finance Agency (formerly OFHEO), 3 rd Quarter 2008
Utah s Foreclosures are Concentrated in Subprime ARM Market 5.0 Foreclosure Starts by Loan Type 4.5 4.0 Percent of Forec closure Starts 3.5 3.0 2.5 2.0 1.5 1.0 0.5 00 0.0 2005 2006 2007 2008 Prime Fixed Prime ARM Subprime Fixed Subprime ARM Source: Mortgage Bankers Association, National Delinquency Survey, 3 rd Q 2008
Utah Saw Slightly Higher Rates of High-Cost Lending During Subprime Boom than National Average 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 Utah More Prevalent Among Minority Borrowers 70% Utah: High Interest Conventional Loans by Race, 2005 60% 50% 40% 30% 20% 10% 0% All borrowers White borrowers Hispanic/Latino Black borrowers Asian/Pacific Islander Native American borrowers borrowers borrowers Source: Home Mortgage Disclosure Act Data, 2005
Unemployment Rate on the Rise, But Still Well Below US Average 8.0 Unemployment Rate 7.0 6.0 5.0 United States Perce ent 40 4.0 3.0 Utah 2.0 1.0 0.0 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Source: Bureau of Labor Statistics, December 2008
Employment Trends by Industry in Utah Total Employed (thousands) Percent Change Utah Dec 08 1 mo.* 3 mo.* 12 mo. Total 1237.7 2.1 8.0 5.5 Trade, Transportation & Utilities 244.2 2.4 15.3 8.5 Government 211.7 2.1 1.7 1.5 Professional & Business Svcs. 161.8 0.6 2.3 1.7 Educational & Health Svcs. 150.0 5.0 4.1 5.8 Manufacturing 123.4 4.2 13.5 9.2 Leisure & Hospitality 111.8 1.4 13.9 11.3 Construction 82.4 22.0 47.9 31.6 Financial Activities 73.3 1.5 24.0 1.1 Other Services 35.4 1.7 3.3 2.2 Information 31.5 1.9 26.0 1.3 Natural Resources & Mining 12.2 7.0 0.0 18.2 Source: Bureau of Labor Statistics, December 2008; *Annualized.
Significant Drop in Construction Employment 25 20 15 Industry Employment Growth: Construction (Year-over-year percent change, monthly) Utah r Percent Chang ge, year-over-year 10 5 0-5 -10 United States -15-20 -25 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Source: Bureau of Labor Statistics, December 2008
Utah Foreclosure Data Maps
Utah Data Maps Distribution of Lending Volume September 2007 Source: Lender Processing Services Inc. Applied Analytics & FRBSF Calculations, September 2007
Utah Data Maps Areas Affected by Concentrated Foreclosures September 2007 Source: Lender Processing Services Inc. Applied Analytics & FRBSF Calculations, September 2007
Utah Data Maps Areas Affected by Concentrated Foreclosures April 2008 Source: Lender Processing Services Inc. Applied Analytics & FRBSF Calculations, April 2008
Utah Data Maps Areas Affected by Concentrated Foreclosures November 2008 Source: Lender Processing Services Inc. Applied Analytics & FRBSF Calculations, November 2008
Utah Data Maps Concentration of REO Properties November 2008 Source: Lender Processing Services Inc. Applied Analytics & FRBSF Calculations, November 2008
Utah Data Maps Areas at Risk for Additional Foreclosures November 2008 Source: Lender Processing Services Inc. Applied Analytics & FRBSF Calculations, November 2008
Salt Lake City Data Maps Neighborhoods Affected by Concentrated Foreclosures November 2008 Source: Lender Processing Services Inc. Applied Analytics & FRBSF Calculations, November 2008
Salt Lake City Data Maps Concentration of REO Properties November 2008 Source: Lender Processing Services Inc. Applied Analytics & FRBSF Calculations, November 2008
Salt Lake City Data Maps Neighborhoods at Risk for Additional Foreclosures November 2008 Source: Lender Processing Services Inc. Applied Analytics & FRBSF Calculations, November 2008
Loan Modifications as Share of Loan Workouts Have Increased 2500 Utah Loan Workouts r Hope Now Servic cers) Nu umber (Adjusted fo 2000 1500 1000 500 0 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Repayment Plans Source: Hope Now Alliance Servicing Data, 3 rd Quarter 2008 Loan Modifications
Yet, Workouts Still Fall Short of Need 12,000 Foreclosure & Delinquencies v. Loan Workouts in Utah 3rd Quarter 2008 10,000000 (Adjusted for Hope Now Servicers) Number ( 8,000 6,000 4,000 2,000 0 Serious Delinquencies Foreclosure Starts Foreclosure Sales Repayment Plans Loan Modifications Source: Hope Now Alliance Servicing Data, 3 rd 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/