Headline: Foreclosures spike. Reality: No, they don’t

There’s a difference between estimates, extrapolation, and reality.

‘Foreclosure starts on FHA-insured loans jumped 73% in April!’ reported Lender Processing Services — a claim that was quickly picked up by HousingWire and others.

But LPS wasn’t looking at real numbers. It was estimating. And HUD was pretty quick to point out that LPS’s numbers were way off.

  • LPS estimate: Foreclosures began on 63,129 FHA-backed loans in April.
  • HUD reality: Foreclosures began on fewer than 19,000 FHA-backed loans in April.

And remember that LPS’s guesstimate was only about FHA-backed loans. As HousingWire points out deep in its story, “Across the entire universe of mortgages tracked by LPS, foreclosure starts actually declined by 2.6%.” (Emphasis mine.)

In 2010, FHA insured a bit more than 40 percent of residential first mortgages.

But the news isn’t all that good. The number of FHA loans in serious delinquency in March was up from a year ago (+22%!), even though it was down month to month. (I don’t have April numbers yet, other than that general statement about ‘fewer than 19,000 foreclosure starts.’)

So while a headline like “March FHA foreclosures up” would make sense, LPS’s claim about April FHA numbers is apparently not only wrong, but way wrong. 

Even the anecdotal evidence (there’s an oxymoron for ya) says LPS is wrong.

J. David Motley is the president of Colonial Savings based in Fort Worth, Texas. Colonial services roughly 18,000 FHA loans, roughly 15% of the company’s entire portfolio. It has held the same foreclosure rate on these loans — roughly 1% — every month for the past year.

“We haven’t seen a spike,” Motley said.

About Andrew Kantor

Andrew is VAR's editor and information manager, and -- lessee now -- a former reporter for the Roanoke Times, former technology columnist for USA Today, and a former magazine editor for a bunch of places. He hails from New York with stops in Connecticut, New Jersey, Cincinnati, Columbus, and Roanoke.
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One Response to Headline: Foreclosures spike. Reality: No, they don’t

  1. Housetrade says:

    Great post, too often do we hear market news that can only be explained as scaremongering. There are many It is excellent that someone is standing up and quite frankly dispelling these rumours as heresay. However we are by no means out of the woods yet, there are touch and unpredictable market times ahead so everyone needs to be dilligent.

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