Avoiding Foreclosure Panic by Understanding Public Record Data
Each quarter, foreclosure data publishers report on the state of the industry either by citing current statistics or attempting to forecast where the industry is headed. While the U.S. housing market is indeed experiencing a crisis, many of these reports misleadingly display astronomical numbers that combine multiple phases of foreclosure on the same property – depressing already low homes values in states like California, Florida, Nevada, Colorado and Michigan, and leading the general public to fear for the worst. Now, more than ever, the public needs accurate, timely data presented in ways that are easy to understand.
To better understand the reports and forecasts as they are published, there are five things every homeowner and prospective homebuyer needs to know about quarterly foreclosure reports and forecasts, including:
■ Industry Terms – Know the difference between a default notice, auction notice, REO, les pendens and more – and most importantly, how they correlate.
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■ Regional Differences – The actual foreclosure data, and how it is reported, varies from region to region.
■ Number Forecasts – While these are generally reasonably accurate, a forecast often includes numbers that have been averaged across regions, or numbers that have been manipulated based on past numbers and guesswork.
■ Timing of Forecasts – Because different states report their foreclosure numbers at different times, no region is ever truly "complete" at the time of foreclosure industry forecasts.
■ "Double-dipping" – Some foreclosure data publishers count a statistic at Notice of Default, and then "double-dip" or count the same property again at auction, thereby inflating the numbers.
The most trustworthy data reporting companies are those that "scrub" their data, rather than just publishing it. All data comes from the same source, but it is how the data is processed and reported that spells the difference between accurate and inaccurate statistics.
When and Where the Data Originates
County Recorders throughout the country provide access to their recorded documents at different intervals. A "best case scenario" in terms of timing would be Los Angeles County, which records a Notice of Default today, meaning the mortgage payments on a property are in substantial arrears, would then be posted on a foreclosure data Web site in approximately six days. San Luis Obispo County, although located within the same state, could take as long as 45 days. Typically, smaller counties generally require a lengthier period of time to report their foreclosure numbers; however, any county can be delayed in reporting when there are an inordinate number of recordings. Therefore, it is nearly impossible to report accurate numbers in most counties for at least three to four weeks after the end of the preceding month.
In America there are 3100 counties, and all are inconsistent with each other regarding their recordings. Some counties record some form of Default document, such as a Notice of Default or Les Pendens, whereas others use an Appointment of Substitute Trustee. Some counties have no reporting altogether or very limited reporting, while still others report only those properties that have been repossessed.
Third party sales and foreclosure cancellations are an important piece of the puzzle in reporting accurate statistics. Third party sales are sales made to a party prior to the foreclosure sale or at auction. A foreclosure cancellation means the past due balance and penalties have been satisfied by the lender and the property is no longer in foreclosure. Either scenario can occur any time prior to the actual day of the auction.
The Foreclosure timeline is not only vastly different from county to county; it also varies from state to state. Texas, for example, is 24 for days from the recording of the Default to the Auction, while New York is 445 days. Delays in the auction, for whatever reason, can extend these timelines into additional months.
How and Why the Data Gets Manipulated
Some foreclosure data publishers take the information from the County Recorder's office and combine it at every stage in the foreclosure – even counting multiple stages on the same property. Yet, reporting any stage of foreclosure filed after the initial Default is simply another stage of the same filing. A notice of sale and repossession (REO) still represent the original household in default. It would, however, be appropriate to report on how many default filings go to the next stage or ultimately are repossessed by the bank. Some data providers have multiple sources of data, which results in multiple postings because the lender name is not standardized and the database recognizes the information as an additional foreclosure. Legitimate multiple foreclosures on an address are not filtered out of statistics and therefore result in inflated numbers – contributing to the aforementioned public panic. Even still, some providers do not receive either third party sale documents or cancellation of foreclosures which, if not removed, will also result in inflated numbers.
Why would a data publisher post inflated numbers? Many of these data publishers sell database subscriptions that draw customers based on the number of listings posted. It is more alluring to post 100,000 foreclosure listings, than to post 50,000. Foreclosure data sites do serve an important function – they help real estate agents, investors and the general public connect with homes that need to be sold, which is why the accuracy of the information provided is so necessary. For the most accurate data, look for a site that is single sourced, where multiple foreclosures on a single address are filtered out of statistics and third party sales and cancellations are collected and processed into data. By gaining an understanding of how the data is being published and what the numbers really represent, Americans can better assess the state of the industry and avoid unnecessary or unsubstantiated panic.
