REO Retention Rates in Massachusetts

Transcription

1 REO Retention Rates in Massachusetts Paul Willen Federal Reserve Bank of Boston Furman Center Roundtable, May 2, 28 Paul Willen (Boston Fed) REO Retention Rates in Massachusetts May 2, 28 1 / 33 Disclaimer Disclaimer The views expressed today are mine. The do not necessarily reflect the views of The Boston Fed Paul Willen (Boston Fed) REO Retention Rates in Massachusetts May 2, 28 2 / 33

2 Disclaimer or the Federal Reserve System When I say we, I mean members of the research department. Paul Willen (Boston Fed) REO Retention Rates in Massachusetts May 2, 28 3 / 33 Caveat Disclaimer Everything I m about to say could be wrong. Some things I m about to say are almost certainly wrong. This is all very preliminary Paul Willen (Boston Fed) REO Retention Rates in Massachusetts May 2, 28 4 / 33

3 Focus on the REO Retention Rate Percentage of foreclosed homes in REO n quarters after foreclosure: REO Retention bad thing. Not generating revenue Property empty Vandalism Damage to community Want to lower REO Retention Paul Willen (Boston Fed) REO Retention Rates in Massachusetts May 2, 28 5 / 33 Figure: REO Retention rate, reo hazard Paul Willen (Boston Fed) REO Retention Rates in Massachusetts May 2, 28 6 / 33

4 Loan-level data Masschusetts Registry of Deeds (Warren) Both directly and from The Warren Group Every mortgage, purchase and sale deed, foreclosure petition, foreclosure deed in Massachusetts going back to We define REO spell Beginning: Foreclosure deed End: Purchase with a mortgage Problems... but spot checking says it works almost always. Paul Willen (Boston Fed) REO Retention Rates in Massachusetts May 2, 28 7 / 33 Actual foreclosures (not petitions) Three facts 1 Concentrated in LMI communities, not new construction. 2 Disproportionately Multi-Family 3 Many put nothing down. 4 Many owned the house for a short time Source: Warren data Paul Willen (Boston Fed) REO Retention Rates in Massachusetts May 2, 28 8 / 33

5 Communities Disproportionately LMI Minority More so than last time LMI % of Minority Zip Code Foreclosure Ownerships Foreclosure Ownerships Paul Willen (Boston Fed) REO Retention Rates in Massachusetts May 2, 28 9 / 33 Figure: Recent foreclosure activity by community reo hazard All Number of foreclosures LMI Non-LMI Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q Q4 Paul Willen (Boston Fed) REO Retention Rates in Massachusetts May 2, 28 1 / 33

6 Property Type Multi-family account for about 1% of the homes in MA. Overwhelmingly concentrated in LMI areas. Paul Willen (Boston Fed) REO Retention Rates in Massachusetts May 2, / 33 Figure: Recent foreclosure activity by property type reo hazard All Number of foreclosures Multi-Fam. Single-Fam. Q1 տcondo Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Paul Willen (Boston Fed) REO Retention Rates in Massachusetts May 2, / 33

7 Tenure Percentage of foreclosees with who owned the house for... < 1 year < 2 years <3 years >3 years 5 years 1 years Paul Willen (Boston Fed) REO Retention Rates in Massachusetts May 2, / 33 Purchase equity Percentage of foreclosees with LTV at purchase of... 8% 8% 95% 95% 1% 1% Paul Willen (Boston Fed) REO Retention Rates in Massachusetts May 2, / 33

8 ( ,.96935] (.15261, ] ( ,.15261] (.8627, ] (.6626,.8627] (.43716,.6626] (.2599,.43716] (,.2599] [,] No data Paul Willen (Boston Fed) REO Retention Rates in Massachusetts May 2, / 33 ( , ] (.11619, ] (.71971,.11619] (.56657,.71971] (.37559,.56657] (.28694,.37559] (.18939,.28694] (.735,.18939] [,.735] No data Paul Willen (Boston Fed) REO Retention Rates in Massachusetts May 2, / 33

9 Figure: Foreclosures and house prices in Mass., 1989-present. Source: Boston Fed and The Warren Group..8 % of homes foreclosed տ House price growth ւ Foreclosure rate Year % growth at annual rates Paul Willen (Boston Fed) REO Retention Rates in Massachusetts May 2, / 33 Figure: REO outstanding in 3/28 from foreclosures 1/1/26-6/31/27. (.5,.7] (.3,.5] (.25,.3] (.2,.25] (.15,.2] (.1,.15] (.5,.1] [,.5] Paul Willen (Boston Fed) REO Retention Rates in Massachusetts May 2, / 33

10 More than a quarter of foreclosures either transfer at auction or are sold within the quarter of foreclosure Only 25 percent are retained after a year. 1 percent after three years Slightly worse for lower income And condos are terrible, but that may be just the early 199s Paul Willen (Boston Fed) REO Retention Rates in Massachusetts May 2, / 33 Figure: REO Retention rate, reo hazard Paul Willen (Boston Fed) REO Retention Rates in Massachusetts May 2, 28 2 / 33

11 Figure: REO Retention rate, , by community income reo hazard Non-LMI ւlow 1 Moderate Paul Willen (Boston Fed) REO Retention Rates in Massachusetts May 2, / 33 Figure: REO Retention rate, , by property type reo hazard Single Familyր ւcondo ւmulti-family Paul Willen (Boston Fed) REO Retention Rates in Massachusetts May 2, / 33

12 Much more difficult to unload property in a down market compared with an up market Only 2 percent at auction or within quarter versus 3 percent in a good quarter. In down market, almost half properties are left after one year, versus 3 percent in up market Much worse in low income communities Paul Willen (Boston Fed) REO Retention Rates in Massachusetts May 2, / 33 Figure: REO Retention rate, cycles reo hazard ր ւ Paul Willen (Boston Fed) REO Retention Rates in Massachusetts May 2, / 33

13 Figure: REO retention rates, over the cycle, low income communities. reo hazard ր ւ Paul Willen (Boston Fed) REO Retention Rates in Massachusetts May 2, / 33 Figure: REO Retention in reo hazard Non-LMI ( )ր ւlow Income ( ) Paul Willen (Boston Fed) REO Retention Rates in Massachusetts May 2, / 33

14 We compare Q1, 1992 (the peak year of the last wave) with Q1, 27. Broadly similar Lenders retained more Condos in 1992 Lenders retained more Multis in 1992 Paul Willen (Boston Fed) REO Retention Rates in Massachusetts May 2, / 33 Figure: All residential reo hazard (875 obs.)ր ւ27 (152 obs.) Paul Willen (Boston Fed) REO Retention Rates in Massachusetts May 2, / 33

15 Figure: Condos only reo hazard (139 obs.)ր ւ1992 (345 obs.) Paul Willen (Boston Fed) REO Retention Rates in Massachusetts May 2, / 33 Figure: Multi-family only reo hazard (129 obs.)ր ւ27 (284 obs.) Paul Willen (Boston Fed) REO Retention Rates in Massachusetts May 2, 28 3 / 33

16 A small percentage of REOs last a long time More than 16 years... Paul Willen (Boston Fed) REO Retention Rates in Massachusetts May 2, / 33 Figure: REO Retention rate, reo hazard Paul Willen (Boston Fed) REO Retention Rates in Massachusetts May 2, / 33

17 Disproportionately condos Only about 25% of all foreclosures are condos But 6 percent of the REOs lasting more than 5 years. Paul Willen (Boston Fed) REO Retention Rates in Massachusetts May 2, / 33