Foreclosures ticked up in May, with Colorado leading the way. And some foreclosure tracking firms are painting a dire outlook for borrowers in interest-only loans and option ARMs.
Last month, 92,746 properties nationwide entered some stage of foreclosure, creeping up less than 2% from the prior month but 28 percent above May 2005, RealtyTrac announced Monday.
RealtyTrac's latest U.S. Foreclosure Market Report also revealed a national foreclosure rate of one foreclosure filing for every 1,247 households during the month, according to the announcement.
The online foreclosure marketplace service noted May numbers echoed first quarter delinquency data released by the Mortgage Bankers Association, which said the seasonally-adjusted delinquency rate fell 29 basis points from the fourth quarter to 4.41%.
"While our report confirms that the number of properties entering foreclosure is still significantly higher than it was during the same period of 2005, we've now seen two months of decreasing foreclosure rates followed by May numbers that were essentially flat," commented James J. Saccacio, RealtyTrac chief executive, in the statement. "That three-month trend indicates foreclosure activity has stabilized in most housing markets across the country after spiking sharply at the beginning of this year."
For the third consecutive month, Colorado posted the nation's highest foreclosure rate -- 2.8 times the national average or one new foreclosure filing for every 436 households, according to the announcement. This is due to an increasing number of properties entering foreclosure, up 13 percent from the prior month to 4,198 properties in May.
Georgia moved up from the fifth-highest foreclosure rate in the previous month to the second-highest, with one new foreclosure filing for every 537 households, RealtyTrac reported.
With one new foreclosure filing for every 555 households, Texas reportedly had the nation's third highest foreclosure rate.
For the sixth month in a row, however, the Lone Star State held the highest number -- 14,506 -- of properties entering some stage of foreclosure. Florida's 8,898 properties in foreclosure accounted for the second most of any state, and California followed with 8,736 properties, according to RealtyTrac.
Meanwhile, Massachusetts foreclosure data firm ForeclosuresMass.com said Monday new May foreclosure filings reached 1,613 -- a 105% increase from May 2005 and the highest number in a given month since ForeclosuresMass.com began collecting data in 2003.
"It is clear that many homeowners, especially those with adjustable rate mortgages, are being pushed closer to the edge as interest rates rise at such a consistent clip," said a ForeclosuresMass.com executive in the announcement. "We may be witnessing a 'perfect storm' scenario where a flat real estate market, higher interest rates, rising energy costs and specialty loans are causing significant difficulty for thousands of Massachusetts property owners."
ForeclosureS.com, a California-based real estate investment advisory firm and foreclosure list publisher, also pointed to the proliferation of high-risk mortgages in combination with rising rates as primary factors in the surge of defaults in Western markets.
"Interest only loans and so-called option adjustable rate mortgages with very low initial rates and high negative amortization are financial time bombs," ForeclosureS.com President Alexis McGee said in the announcement. "When these loans reset to full amortization and market rates, the payment shock to homeowners is severe."
As of June 22, Los Angeles County notices of default were over 14,000 and more than 700 had gone into foreclosure. Sharp rises were also seen in Denver, Colo., and Phoenix, Ariz., where the respective ratio of new notices of default to actual foreclosures is more than 3-to-1 and almost 10-to-1, McGee said.
She also pointed out that Phoenix and Las Vegas, Nev., households are being distressed by an invasion of out of state speculators.
"In 2004 and 2005, in both of those markets, more than 25% of sales were made to out of state investors," McGee said. "Now, as rates rise and those markets cool, the speculators who came late to the party are being washed out of the market."
With prices escalating, renters and investors, "finding themselves trapped by negative cash flows and slowing sales volume, had no choice but to walk away from their properties," she added.