The Fastest & Slowest Growing Foreclosure Rates in the United States

New property data from Estated reveals several counties in Colorado are producing the fastest growing rates of foreclosure across the country.

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Since the 2008 housing collapse, foreclosures have been a hot button topic amongst the residential real estate industry in the United States as a result of their contributions (among other contributing factors) to the global financial crisis.

Over the past 2 years, COVID-19 has created extraordinary hardship for millions of Americans who have been unable to pay their mortgage due to job uncertainty as a result of the pandemic.

While many Americans with a government-backed mortgage were protected under the Coronavirus Aid, Relief, and Economic Security Act (CARES) and entered a forbearance program, others were not so lucky in finding relief for their unpaid mortgage payments and risked losing their home to foreclosure. But what exactly is foreclosure?

What is a foreclosure?

Foreclosure is the process by which a lender takes possession of a home when a homeowner fails to make their mortgage payments. While the foreclosure process varies state-to-state, there are some commonalities found in all foreclosure processes including payment default and notice of default (NOD).

Payment default occurs when a homeowner misses at least one mortgage payment and receives notification of missed payment from the lender. Typically, lenders offer a grace period followed by a missed payment notice and, in some case, a late-fee charge.

After three consecutive months of missed payments, the lender usually sends a demand letter or notice to accelerate with the amount in delinquency outlined as well as a deadline of 30 days for the borrower to bring the mortgage current.

After four consecutive months of missed payments (90 days past due), a notice of default (NOD) is sent which formally starts the foreclosure process.

Coronavirus Aid, Relief & Economic Security Act

In March 2020, the Coronavirus Aid, Relief and Economic Security Act (CARES) was passed in response to the economic fallout caused by the COVID-19 pandemic. The act provided immediate monetary relief to millions of Americans who could no longer afford to make their mortgage payments.

In addition to monetary relief, the Act also protected those with federally-backed mortgages from foreclosure—allowing the right to request a mortgage forbearance for up to 180 days.

However, as foreclosure moratoriums have started to expire with the start of 2022, hundreds of thousands of mortgages in forbearance have begun to face the threat of foreclosure once again.

Why are foreclosures interesting?

Foreclosures are interesting for a number of factors.

While there is significant risk associated with foreclosed properties, from an investment perspective, foreclosures present an opportunity for investors to purchase homes at a discounted price with the potential for a high return on investment (ROI).

From a market perspective, an increase in foreclosures can actually signal or precipitate a housing crash or bubble burst in the real estate market.

Fastest and slowest foreclosure rates in the US

With the expiration of safeguards against foreclosures, we thought it would be interesting to compare the fastest and slowest growing counties in the United States based on foreclosure rate year-over-year through March 30, 2022.

*As mentioned above, because the foreclosure process varies widely from state-to-state, it's difficult to actually track and measure foreclosures due to the differences in the progression of the foreclosure process across the country. Instead we're measuring notice of defaults (NODs) which is a precursor in the foreclosure process. It is important to note that not all notice of defaults result in foreclosures, but it remains the best estimate of the relative rates of the actual number of foreclosures between areas.

**  *** ****While percentage change in notice of defaults (NODs) year-over-year may seem extreme, this is not unexpected as a result of government-backed forbearance and mortgage foreclosure moratorium programs ending.

Our property data above reveals that 7 of the top 20 fastest growing counties by foreclosure rate are located in Colorado. At the most extreme, 1 in every 645 properties in Pueblo County received a notice of default (NOD).

On the flip side, almost all of the top 20 slowest growing counties by foreclosure rate are located on the east coast of the country with 15 of the counties located in Florida (9), Pennsylvania (3), and New Jersey (3).

So what does it all mean?

Losing homes to foreclosure is never a welcome sight. However, the housing market is always clamouring for more inventory at a better price.

With forbearance ending and inflation & interest rates on the rise, current defaults in business and consumer debt could very well turn into more forthcoming foreclosures.

For smart investors looking for greater income potential, foreclosures present a real opportunity for significant return on investment. They also provide the opportunity to provide better quality rentals for individuals affected by the housing affordability crisis.

Only time will tell what the market has in store for real estate investors but there may be a very real opportunity to start investing in foreclosures in counties across the United States—in particular Colorado.

Thank you for reading our blog about the fastest and slowest counties by foreclosure rate in the United States so far in 2022.

If you're interested in unlocking more key insights about foreclosures or the rest of the residential real estate market, Estated offers the most comprehensive data on over 150 million properties nationwide.

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