Monday, August 1, 2011

Foreclosures down in July

Posted By on Mon, Aug 1, 2011 at 12:59 PM

This missive comes from El Paso County Public Trustee Tom Mowle, who's reporting that foreclosures again fell below previous levels in July. He's now predicting a 31 percent decline in foreclosure starts for 2011.

Maybe the economy, at least, isn't getting any worse. Or, all the people who are in dire straits have already lost their homes, so there aren't any more for the banks to foreclose on. But Mowle has his own theory as explained below, which isn't a bright reflection on the local economy.

Mowle will report to the Board of County Commissioners on Thursday. Here's his release:

As part of my budget update for El Paso County, I am projecting 3303 foreclosure starts for the year, which would be a 31% drop from last year and the lowest total since 2006. That number was based on an average of 260 foreclosure starts per month in the last 6 months of the year — with only 238 starts in July, that estimate already looks like it may be high.

Likewise, in that budget update I projected 34,641 releases for the year, which would be just ahead of last year’s low total. This was based on releases recovering to about 3,000 per month for the last 6 months of the year — and here again, the estimate already looks high as we only released 2312 deeds in July.

The number of projected releases is approximately the 35,000 that we placed in the 2011 budget, so there is little impact on revenues. We anticipated that private-party home sales would remain low this year — and even into next year — due to the large number of homes still in foreclosure or bank-owned.

On the other hand, the number of foreclosure starts is well under the 4500 we placed in the 2011 budget. Since we book most of the foreclosure revenue when the file is closed (sold or withdrawn), there has so far been little impact on revenues here, either. Through the 2nd Quarter, in fact, the office is 5.8% ahead of budgeted revenues for the year. We do expect, however, that revenues will decline in the final 2 quarters.

This persistent drop in foreclosure starts — notable both for the suddenness of the drop from January to February and then the stability of the monthly numbers since then — appears to be a lasting legacy of the “robosigning” investigation from last October. As part of the agreement the banks have reached with regulators, banks are discouraged from double-tracking people in default. Thus banks seem to be working with borrowers before the foreclosure is filed, rather than after, which is delaying the start of those foreclosures. This means that to some extent we are probably seeing a delay in foreclosures rather than a decline, but that delay also allows people to sell or obtain additional income and work out a loan modification and avoid going into foreclosure altogether. It also means, however, that a greater proportion of the foreclosures that have started this year will result in a sale at auction. The percentage of properties sold at the first opportunity has been sharply up in the last couple of months, while the number withdrawn or cured is down.

On the expense side, we are working to bring down costs where they are controllable. We have reduced costs for office supplies, equipment rental, and personnel from what they had been, and this savings will continue into next year. Our 2012 budget for personnel and other expenses is down 18% from this year, compared to an anticipated 11% drop in revenue.

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