US home forfeitures

This page is about distressed sales of homes. The main question is the rate at which the backlog of distressed loans is being cleared.


23 Jul 2013.

Home forfeitures are probably in a declining trend. Projecting from current trends suggests at least another year may be needed to bring the backlog of distressed loans down to a more normal level.


The graph shows quarterly data for all distressed sales, including all foreclosure auctions as well as short sales and deeds in lieu. The data from the Federal Housing Finance Agency (FHFA) is for Fannie Mae and Freddie Mac combined.

Data through 2013 Q1:

Note that in 2008, where the above data start, the foreclosure crisis was already well advanced, as can be seen from this graph from the IMF:


Fannie and Freddie delinquencies, mods and foreclosures (23 Jul 2013) The two key facts are (1) serious delinquencies (90+ days delinquent or in foreclosure) have been dropping for several years, but (2) they remain high and will take at least another year to return to a normal level.

Fannie Mae and Freddie Mac, in their role as quasi-governmental agencies, have been under pressure throughout the crisis to increase foreclosure mitigation efforts. Nevertheless, modifications are still very small in number compared to the backlog of problem loans.

Mortgage Metrics report (23 Jul 2013) The number of distressed loans (60+ days delinquent, delinquent and in bankruptcy, or in the foreclosure process) is somewhat more than half way back to normal.

The two main ways these loans are currently cleared is through forfeitures (foreclosure sales, short sales, or deeds in lieu of foreclosure) and modifications. The combined volume of forfeitures and modifications remains small compared to the backlog of distressed loans.


Two sources sometimes (but not consistently) cover monthly data on home forfeitures:

Note that the Mortgage Banker's Association provides widely quoted numbers on other stages of the foreclosure process, but does not provide foreclosure sales.

See also

Clippings below were used in the construction of this page

NAR: 45% of Q4 home sales were distressed

12 Feb 2009. NAR press release.

“4th Quarter Metro Area Home Prices Down as Buyers Purchase Distressed Property”

“Distressed sales – foreclosures and short sales – accounted for 45 percent of transactions in the fourth quarter … NAR President Charles McMillan … “Distressed home sales have risen from about 38 percent of transactions in the third quarter, meaning people are responding to discounted prices and are slowly absorbing the excess inventory. Buyers clearly see value in today’s pricing,” he said.”

Campbell reports 64% distressed sales nationwide

Jul 2009. Campbell Communications report.

“Real Estate Agents Report on Home Purchases and Mortgages - 2009”

“During June 11-21, 2009, Campbell Communications conducted a survey of real estate agents on the home purchase and mortgage markets. The survey, “Survey of Real Estate Agents on Home Sales and Mortgages─2009,” is the fourth in a series that tracks agents on current issues in the housing and mortgage markets. The survey was sponsored by Inside Mortgage Finance. …

Key statistics and facts from the survey results include:

  • The market for home purchases can be divided into segments of 26% for damaged REO, 23% for move-in ready REO, 14% for short sales, and 36% for non-distressed properties.
  • Forty-three percent of homebuyers are first-time homebuyers, 29% are current homeowners, and another 29% are investors.
  • First-time homebuyers account for the majority of move-in ready REO sales while investors account for the majority of damaged REO sales.
  • Current homeowners concentrate their home purchases on non-distressed properties and buy comparatively less damaged REO. …
  • For first-time homebuyers, “Government incentives to buy (tax credits, mortgage deduction)” is the No.1 motivation to buy.
  • For current homeowners buying homes, “Retirement relocation” and “job relocation” are the No.1 and No. 2 motivations to buy, respectively. …

The overall survey obtained a representative sample of real estate agents. More than 500,000 real estate agents were asked to complete the survey online via e-mail solicitations produced from a Campbell Communications database of active agents.

The survey instrument was long and detailed, covering more than 50 separate questions. The length and complexity of the survey instrument made the task of obtaining and retaining respondents challenging. As an incentive for respondents, selected survey results were offered in return for completing the survey.

Each survey respondent passed a validation question at the beginning of the survey asking whether he/she were an active real estate agent currently showing or listing residential real estate. In addition, we employed the following validation criteria for agents:

  • One or more commissioned transactions in the past 12 months
  • Filling one of the following positions: Agent or Individual Broker; Broker-Owner/Partner/President/Owner; Office Manager

A total of 1,556 real estate agents responded to the survey and passed validation criteria, yielding an excellent base of responses. [0.3% response rate!] …

We asked, “How many commissioned transactions have you completed in the last 12 months?” A majority of agent respondents, 52%, had 11 or more transactions in the past 12 months. Using a weighted average, we found that the average respondent had 14 transactions in the past 12 months. …

“Short sales” refers to properties that would be sold for less than the mortgage amount outstanding [this sounds different from the usual definition, if the seller is an individual and the bank is made whole, but the comments make it clear that the usual definition is the one in mind].”

CR on the disparity in distressed sales numbers

12 Aug 2009. Calculated Risk.

“National Data: Distressed Sales and Types of Buyers. by CalculatedRisk”

“According to this national survey of real estate agents, over 63% of sales were distressed sales in Q2. This is higher than the numbers reported by NAR. From NAR:

'Distressed properties … accounted for 31 percent of sales in June … Distressed properties, which declined to 33 percent of all sales in May from 45 percent in April …'

The Campbell numbers seem high to me. In Sacramento over 70% of sales in June were distressed, and I'd expect that area to well above the national level. But the NAR numbers seem low.”

About half of all sales are distressed

22 Mar 2010. Campbell Surveys

“Nearly Half of Home Purchases Are Distressed Properties, Latest Campbell/Inside Mortgage Finance Survey Shows”

“The share of home purchase transactions involving distressed properties surged to almost half in February, according to the latest Campbell/Inside Mortgage Finance Monthly Survey of Real Estate Market Conditions

Last month distressed properties – those involving homes acquired as part of a foreclosure or pre-foreclosure sale – accounted for 48.1% of the home purchase transactions tracked in the closely-watched monthly survey. This was way up from the 37.3% level recorded as recently as November. It was also the highest distressed property market share seen since last July.

Stepped up government efforts, including temporary foreclosure moratoriums and a push to qualify more financially troubled homeowners for mortgage modifications, temporarily reduced the number of distressed properties coming on the housing market in the fall and much of this past winter. But now a growing number of distressed properties appear to be hitting the housing market.

There are three major types of distressed properties: damaged Real Estate Owned (REO), move-in ready REO, and short sales. During the period from November to February, the proportion of all three categories rose; damaged REO grew from 12.3% to 14.4%, move-in ready REO grew from 12.6% to 16.6%, and short sales grew from 12.4% to 17.1%.

“Short sales now account for the No. 1 category of distressed property,” commented Thomas Popik, research director for Campbell Surveys. “Losses on short sales are typically lower than for REO, and both lenders and the government are pushing programs to facilitate short sales. But as more and more people default or simply want to walk away from their properties, mortgage servicers are having trouble expeditiously processing these complicated transactions.”

Meanwhile, in a hopeful sign for the housing market, first-time homebuyers are once again playing a growing role. The latest survey showed that the share of first-time homebuyers grew from 38.9% in January to 42.9% in February. Much of this growth is attributable to a major tax credit due to expire this spring. In order to qualify for an $8,000 tax credit, first-time homebuyers must have signed a purchase contract by April 30 and must close the transaction by June 30.

As more distressed properties have come onto the market, home prices are again showing signs of weakness. Average home prices for all four categories of properties – damaged REO, move-in ready REO, short sales, and non-distressed – declined from January to February in the latest survey.

The Campbell/Inside Mortgage Finance Survey of Real Estate Market Conditions polls more than 1,500 real estate agents nationwide each month and provides up-to-date intelligence on home sales and mortgage usage patterns.”

First American on distressed sales

8 Apr 2010. First American CoreLogic press release (ht CR)

“Distressed Sales Again on the Rise, Reaching 29% in January and Nearly 1 Million Distressed Sales During the Last Year According to First American CoreLogic”

“distressed home sales – such as short sales and real estate owned (REO) sales – accounted for 29 percent of all sales in the U.S. in January: the highest level since April 2009. The peak occurred in January 2009 when distressed sales accounted for 32 percent of all sales transactions (Figure 1). After the peak in early 2009, the distressed sale share fell to 23 percent in July, before rising again in late 2009 and continuing into 2010. …

The home sales data was extracted from First American CoreLogic’s public record property transactions database that covers over 2,200 counties in the US. These sales cover about 85% of all sales transactions. Real estate owned (REO) transactions are bank owned properties that are sold to a third party and recorded as deed transfers. Short sales are identified by comparing the sales price to the 1st and 2nd lien mortgage amounts (which includes cash‐out refinances) to determine the total amount of mortgage debt. If the sales price is less than the debt amount, it’s considered a short sale.”

[It is, a priori, not very believable that prices could track distressed sales in the long run – at least an inflation adjustment would be required. In any case, this is not very useful because CoreLogic do not release updated data.]

First timers 48%; distressed > 50%; short 19%

19 Apr 2010. Housing Wire.

“First-Time Buyers Take Larger Share of Home Sales in March. by DIANA GOLOBAY”

“First-time homebuyers made up a record high share of sales in March, according to the latest Campbell Surveys poll of more than 1,500 real estate agents nationwide.

Of all home purchases in the month, first-time homebuyers accounted for 48.2%. The new monthly record eclipsed the previous peak of 46.9% last October when the expected November expiration of the original homebuyer tax credit drove up the share of first-time homebuyers. The March uptick comes ahead of the extended tax credit deadline.

“The strong participation of first-time homebuyers this spring is a welcome surprise,” said Thomas Popik, research director for Campbell Surveys. “Many observers had felt that the pool of first time homebuyers had been depleted last fall, but this is turning out not to be the case. Instead, the normal spring-summer buying season is combining with the tax credit to produce blow-out results for first-time homebuyers.”

The surge in first-time homebuyer activity in March came at the same time the volume of distressed properties in the housing market climbed to more than 50%, according to the survey.

The latest survey found that short sales accounted for 18.6% of the housing market in March.

“None of the survey results take into account the new Home Affordable Foreclosures Alternative (HAFA) program for short sales,” Popik said. “This government program took effect in early April, so we expect short sales to account for an even greater proportion of the real estate market in coming months.””

Freddie Mac distressed sales Q1 2010

5 May 2010. 10Q.

“FORM 10-Q. Federal Home Loan Mortgage Corporation”

“We increased our efforts to complete pre-foreclosure sale transactions during the first quarter of 2010. The number of completed pre-foreclosure sales during the first quarter of 2010 was 9,619, compared to 3,093 in the first quarter of 2009. [probably includes DIL] …

REO Inventory … Total properties acquired … 29,416 [in Q1]. [does not include third-party at auction] … Total properties disposed … 21,969.”

Note on choice of RealtyTrac data

6 May 2010. Jim Fickett.

The RealtyTrack REO number only includes those auction sales in which the lender took back the property. To try to get a number closer to all auction sales, one could instead track the number of auction notices (Notices of Trustee Sale + Notices of Foreclosure Sale). But the number of auction notices bears no strong relationship to the number of sales. It went down during most of 2009. Why the disconnect? RealtyTrac gives quarterly results as well, eliminating double counting of homes that receive multiple notices, and they reported 356 thousand homes receiving auction notices in Q2 2009. Scaling up from the 90% of the market that they cover, there may have been about 396 thousand homes affected in total and, thus, in the 65% of the market covered by the Mortgage Metrics report, there may have been about 257 thousand homes affected. But Mortgage Metrics reports only 132 thousand foreclosure sales. It seems that actual foreclosure auctions followed auction notices only with a significant delay, or not at all, in many cases.

Fannie Mae distressed sales Q1 2010

10 May 2010. Q1 results press release.

“Fannie Mae Reports First-Quarter 2010 Results”

“If we are unable to provide a viable home retention solution for a problem loan, we seek to offer foreclosure alternatives, primarily preforeclosure sales and deeds-in-lieu of foreclosure. We have increasingly relied on foreclosure alternatives as a growing number of borrowers have faced longer-term economic hardships that cannot be solved through a home retention solution, and we expect the volume of our foreclosure alternatives to increase in 2010.

In the first quarter of 2010, Fannie Mae, in conjunction with our servicing partners, took the following home retention and foreclosure prevention actions …

Preforeclosure sales and deeds-in-lieu of foreclosure of 17,326, compared with 13,459 in the fourth quarter of 2009. …

We acquired 61,929 single-family real estate-owned properties through foreclosure in the first quarter of 2010, compared with 47,189 in the fourth quarter of 2009. …

Although we have expanded our loan workout initiatives to keep borrowers in their homes, we expect our foreclosures to increase during 2010 as a result of the adverse impact that the weak economy and high unemployment have had and are expected to have on the financial condition of borrowers.”

[So short sales are now “preforeclosure sales”.]

Barclays forecast for distressed sales rate

12 May 2010. Housing Wire.

“Shadow Inventory To Peak in Summer of 2010: Barclays. by JON PRIOR”

“The shadow inventory should reach its height in the summer in 2010 before falling gradually as the market absorbs 130,000 distressed properties per month, according to the report. Over the next three years, analysts forecast 4.7m distressed sales with 1.6m in 2010, another 1.6m in 2011 and 1.5m in 2012.”

Campbell Surveys April: 12.8% damaged; 17.9% short

24 May 2010.

“First-time Buyers Fade in April”

“the Campbell study found that the proportion of damaged foreclosed properties or so-called real estate owned (REO) sold during April plunged. Damaged REO accounted for 15.4 percent of transactions in March, but only 12.8 percent in April. One reason for the drop in damaged REO may be increasing numbers of short sales.

Short sales – where the home is sold for less than the mortgage amount outstanding and with lender approval – represent a way to resolve homeowners in default without going through the foreclosure process. Short sales were the largest portion of the distressed property housing market in April with 17.9 percent, the survey found.”

Inventory in months of supply is inversely correlated with prices

23 Jun 2010. Calculated Risk.

“Existing Homes: Months of Supply and House Prices. by CalculatedRisk”

“Earlier I mentioned that a normal housing market usually has under 6 months of supply. The current 8.3 months of supply is significantly above normal …

After the tax credit related activity ends, the months of supply will probably increase, and the ratio could be close to double digits later this year. That level of supply will put additional downward pressure on house prices.

This graph show months of supply and the annualized change in the Case-Shiller Composite 20 house price index (inverted).

Below 6 months of supply (blue line) house prices are typically rising (red line, inverted).

Above 6 months of supply house prices are usually falling (although there were many programs to support house prices over the last year).”


Campbell survey distressed fraction through Sep 2010

27 Oct 2010. Cecala congressional testimony.

“Testimony of Guy Cecala, CEO and Publisher Inside Mortgage Finance Publications, Inc., Hearing of the Congressional Oversight Panel”