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VOL. 126 | NO. 136 | Thursday, July 14, 2011

Q2 Foreclosure Activity Slows

By Andy Meek

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The second quarter foreclosure numbers for Shelby County are Exhibit A in why context is sometimes more important than content.

On the surface, foreclosure activity in Shelby County has slowed compared to Q2 2010. Banks sold about 16 percent fewer foreclosed homes to new borrowers in Q2 compared to Q2 2010, and banks brought about 15 percent fewer foreclosed properties back onto their books during that same period.

There were 1,130 foreclosures during Q2, down 15.5 percent from the 1,338 foreclosures during Q2 2010, according to real estate information company Chandler Reports, www.chandlerreports.com.

The number of bank sales, generally referring to sales of foreclosed properties to new owners, dropped almost 16 percent during that same period, sliding to 1,013 in Q2 from 1,200 in Q2 2010.

The thing that gets the foreclosure process started – publishing a newspaper notice informing borrowers a public auction of the property is imminent – has also declined. The number of notices announcing that borrowers are in default dropped 21 percent between the two second quarter periods. They fell to 2,358 in Q2 from almost 3,000 notices in Q2 2010.

So why aren’t consumer advocates, real estate agents and anyone else connected to the industry jumping for joy? Well, to use an analogy: No one would consider themselves to have finished a DVD if they’ve pressed the pause button only halfway through.

That’s the same thing behind the Q2 numbers, according to people like RE/MAX on Track agent Mindy Creech.

Lenders and mortgage services have spent months pressing the pause button. And it’s unclear how much of the “movie,” so to speak, still has not played.

“I think banks are a little more leery about moving quickly on any kind of foreclosures at this point after all the problems from last year,” said Creech, who also serves on the Memphis Area Association of Realtors board of directors.

“I primarily do Freddie Mac foreclosures, and I know the asset company I work with for Freddie Mac, they pretty much stopped everything for a couple of months. It is still taking longer for the whole process to go through, because they are, I think, taking extra time doing all the due diligence, making sure their i’s are dotted and t’s are crossed.”

The number of foreclosure notices also wouldn’t be an accurate gauge of the problem if Tennessee state lawmakers succeed in an effort they tried and failed at this year. Lawmakers came close to passing a revision to state law that would reduce the number of times foreclosure notices are required to be published in newspapers from three to two.

The fact that so many more notices were filed this quarter than there were actual foreclosures can partly be explained by the fact sometimes borrowers can work out modifications or other payment arrangements before the foreclosure process is completed.

Also, if banks are currently moving slower than normal in processing foreclosures and addressing mortgage defaults, that too would explain a decline.

“I do believe that programs put in place by the government have helped to slow down the process,” said Greg Glosson, broker with Fast Track Realty LLC, before noting the influence of “shadow inventory” – basically, seized homes that banks have not yet put back out into the market.

“As you drive throughout the area, I believe you can see many properties caught in the shadow inventory. Until we have a reduction in unemployment and higher consumer confidence, we will continue to see and hear about the shadow inventory.”

Adding up the number of foreclosures in the five Memphis ZIP codes that saw the highest foreclosure totals in Q2 results in a figure that’s 20 percent smaller than the total of the five most-active ZIP codes in Q2 2010.

As an example, Raleigh’s 38128 ZIP code topped the list during both Q2 periods. But the total there went to only 86 in Q2 103 in Q2 2010.

Chandler Reports is a division of The Daily News Publishing Co. Inc.

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RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 96 173 11,698
MORTGAGES 95 174 13,601
FORECLOSURE NOTICES 19 19 1,877
BUILDING PERMITS 291 387 24,551
BANKRUPTCIES 65 118 7,591
BUSINESS LICENSES 29 60 3,972
UTILITY CONNECTIONS 35 84 4,765
MARRIAGE LICENSES 18 38 2,582

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