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Repeat Foreclosures Are Driving Uptick in Foreclosure Starts

foreclosure-sign [1]Amid all the good news for housing lately, foreclosure starts were up by 7 percent in August—driven by a rise in the amount of repeat foreclosures, according to the August 2015 Mortgage Monitor [2] released by Black Knight Financial Services [3] on Monday.

Repeat foreclosures accounted for 57 percent of the 80,500 foreclosure starts reported in August, the largest share of repeat foreclosures for one month on record, according to Black Knight. While all foreclosure starts saw an increase of 7 percent month-over-month in August, the number of repeat foreclosures jumped by 13 percent.

Coinciding with the substantial increase in repeat foreclosure starts in August was an nearly equally substantial decline in the number of first time foreclosure starts. According to Black Knight, first time foreclosure starts totaled 35,000 in August, their second-lowest total for one month since the crisis began (only April 2015 was lower).

“The high incidence of repeat foreclosures is actually a testament to the lengths servicers have been going in terms of actively working with high delinquency loans and trying to find the best path to pursue with these borrowers," said Ben Graboske, Chief Technology Officer for the Data and Analytics Division at Black Knight. "When this happens, loans move out of active foreclosure and back into 90+ days delinquent status, presumably to pursue loss mitigation efforts. If and/or when those fail, the loan is shifted back to foreclosure."

“The high incidence of repeat foreclosures is actually a testament to the lengths servicers have been going in terms of actively working with high delinquency loans and trying to find the best path to pursue with these borrowers,"

The fact that the share of repeat foreclosure starts is increasing is not completely bad, according to Graboske.

"The problem today lies with a smaller and smaller group of loans that have been distressed for many years now—over half of all loans in foreclosure have been past due for two years or more—and which have often gone in and out of foreclosure many times," Graboske said. "When repeats are making up a greater and greater share of a smaller and smaller population (the population of loans in foreclosure has been steadily declining for quite some time now, despite the occasional bump in starts), it’s actually a good thing—not for those people, of course, but in terms of a barometer of overall recovery."

Overall, foreclosure starts were little changed over the year, seeing only a 1.3 percent decline from August 2014, according to Black Knight.

10-2 BK MM graph [4]