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Residential Department: DataDecoded: June 2017

 

DataDecoded

Foreclosures are down, but some loan buyers buck the trend

r_2017-06_chart_DataDecodedForeclosure activity nationwide dropped below pre-recession levels in fourth-quarter 2016 for the first time since the housing crisis began — a trend that continued this past first quarter.

The trend is decidedly different, however, for a handful of financial companies newer to the world of foreclosures.

An Attom Data Solutions analysis of foreclosure-auction sales shows that 264,458 single-family homes and condos transferred ownership at foreclosure auction via a trustee’s deed, foreclosure deed or sheriff’s deed in 2016, down 20 percent from the previous year, down 35 percent from two years ago and down a whopping 68 percent from the peak of 834,645 homes transferring ownership via foreclosure auctions in 2010.

A very similar trend was true for most of the top 10 companies in terms of the volume of foreclosure-auction transactions in 2016. Most of those transactions involved government-backed finance agencies such as Fannie Mae, Freddie Mac, the U.S. Department of Housing and Urban Development (HUD) and the Department of Veterans Affairs, or traditional big banks such as Wells Fargo, U.S. Bank, Bank of America and JPMorgan Chase.

But one of the top 10 players in the foreclosure-auction world stood out as not fitting into either of these expected categories or fitting into the downward trend in foreclosure property acquisitions. LSF, or Lone Star Funds, is a private-equity company that has been snatching up distressed mortgages from the very same big banks and government agencies that are now seeing the big declines in completed foreclosures. A September 2015 article in the New York Times claims private-equity players like LSF, as of that time, had “bought more than 100,000 troubled mortgages at a discount from banks and federal housing agencies.”

LSF acquired a total of 5,378 single-family homes and condos through foreclosure auctions in 2015 — more than twice the 2,189 properties acquired via foreclosure auctions in 2014.

While LSF’s 2016 number of 4,980 was 7 percent below the 2015 total, it was still up 128 percent from 2014 and up a whopping 3,288 percent from 2010, when LSF acquired only 147 homes at foreclosure auction.

The nearly 5,000 properties acquired through foreclosures by LSF in 2016 still paled in comparison to some of the giants in the mortgage industry. Those players and the number of properties acquired via foreclosure auctions in 2016 include Fannie Mae (28,348), Wells Fargo (17,850) and U.S. Bank (16,690), but LSF’s tally was enough to rank No. 8 in terms of deals completed for the year.

Not far below the top 10 players are a few other private companies swimming against the downward flow of the foreclosure current Carrington Mortgage Services acquired 1,351 homes through foreclosures in 2016, up by 8 percent from the previous year and up 379 percent from 2014 — although still down 38 percent from 2010, when it was one of the early adopters of buying nonperforming loans in bulk.

PennyMac — another bulk buyer of distressed mortgages, according to a recent New York Times article — acquired 1,281 homes via foreclosures it initiated in 2016, down from 2015 and 2014, but still up a hefty 255 percent from 2010.

A company called MTGLQ, a subsidiary of investment bank Goldman Sachs, is a more recent entrant to the world of buying distressed mortgages, but bought them by the billions of dollars in 2016. It acquired 589 homes through foreclosure auctions in 2016, a smaller number but up dramatically from a year earlier (156 percent) and two years earlier (585 percent) — and compared to 2010, the 2016 figure represents a 779 percent jump.


 

Daren Blomquist is senior vice president at Attom Data Solutions. With Attom Data Solutions since 2001, he is the company’s primary media spokesperson and an expert on the housing market. Blomquist is executive editor of the company’s award-winning Housing News Report and creates comprehensive real estate reports cited by thousands of media outlets and referenced by numerous entities, from local real estate investment clubs to multinational corporations, universities and federal, state and local government agencies. Reach him at daren.blomquist@attomdata.com.

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