Foreclosures expected to grow slowly to close 2024: Auction.com

A survey of mortgage default servicing leaders revealed that foreclosures are expected to rise slowly during the second half of 2024, while ample amounts of home equity should keep many properties in loss mitigation from moving into foreclosure status.

Auction.com, a marketplace for distressed home sales, released its 2024 Seller Insights report on Friday. The report covers a wide variety of insights from default servicing professionals who were surveyed at the company’s annual Disposition Summit in April.

Fifty-seven percent of survey respondents expect growth of 1% to 4% in their organization’s foreclosure volumes during the latter half of this year. Ten percent expect an increase of 5% or more while another 10% anticipate a decrease of 5% or more.

“Completed foreclosure volumes have remained at about half of their 2019 levels this year thanks in large part to more robust loss mitigation options coming out of the pandemic,” Auction.com chief business officer Joe Cutrona said in the report.

Half of loans in loss-mitigation status at the time of the survey were expected to “permanently perform“ and avoid foreclosure status, Auction.com reported. This included 58% of conforming loans purchased by Fannie Mae and Freddie Mac, 49% of government-backed loans and 34% of nonagency loans.

Home equity levels also played a role in these responses as respondents estimated that the seriously delinquent loans (90 or more days past due) in their portfolio had a combined loan-to-value ratio of 65% on average.

“The home equity cushion is being creatively utilized by mortgage servicers and policymakers to help distressed homeowners avoid foreclosure,” Elan Chambers, Auction.com’s senior vice president of strategic partnerships and business development, said in the report.

Rising costs for homeowners insurance and property taxes were cited by respondents as the biggest potential risks for higher delinquency rates in 2024. These “hidden” homeownership costs led the list of risk factors, followed by rising consumer debt delinquencies, rising unemployment, commercial mortgage defaults and declining home prices.

“Although the risk of rapidly rising delinquencies in the near term remains low, there are some signs of consumer and homeowner stress emerging,” said Daren Blomquist, Auction.com’s vice president of market economics.

Default servicing professionals were also asked for their views on unemployment, mortgage rates and home prices. Respondents expected the U.S. unemployment rate to end this year at 3.6%, with mortgage rates declining to an average of 6.3%. Three in four respondents believe that home price appreciation will remain positive through 2024, while 21% anticipate a pullback of less than 5%.

“Our partners in the default servicing industry are on the frontlines of any emerging risk in the mortgage market, and we communicate regularly with them to identify those risks and build solutions of value,” Auction.com CEO Jason Allnutt said.

“Nearly halfway through the year, leaders in this industry are telling us that the risk of rapidly rising delinquencies and foreclosures this year remains low and that they expect a soft landing in the housing market and broader economy despite an expectation that mortgage rates will remain relatively high throughout the remainder of the year.”