ABQ bucks U.S. trend toward fewer foreclosures

“Markets with increasing foreclosure activity in 2012 took the first step in finally purging delayed distress left over from the bursting housing bubble,” said Daren Blomquist, vice president at Irvine, Calif.-based RealtyTrac.

Albuquerque ranked 53 out of 212 metros for having a high foreclosure rate in 2012. In 2011, Albuquerque ranked 61 for high foreclosure rate.

Outside the metro area — Bernalillo, Sandoval, Valencia and Torrance counties — homes facing foreclosure dropped 9 percent from 2,550 in 2011 to 2,324 in 2012. Nationwide, about 1.8 million homes were somewhere in the foreclosure process in 2012, a 3 percent drop from 2011.

The Albuquerque metro is clearly the hub of foreclosure activity in New Mexico. It saw 75 percent of the foreclosure activity in the state during 2012, far in excess of its 43 percent share of the state’s population and 41 percent share of households.

Despite the brisk rate of foreclosures, Albuquerque’s existing home market in general had its best year in 2012 since the housing bubble burst in 2008, scoring what could be called the housing trifecta of rising home sales, rising average sale price and declining inventory of homes on the market.

The most obvious place to look for an explanation is Albuquerque’s struggling economy. The metro has experienced negative job growth for most of the past four years and is now at an employment level similar to that of 2004, says the state’s year-end 2012 labor report.

New Mexico’s economy as a whole has done better, but not consistently and not well enough to explain Albuquerque’s disproportionate share of foreclosure activity.

One factor could be whether homebuyers got their mortgages from a community bank or one of the mortgage-lending giants, such as Wells Fargo, Bank of America and JPMorgan Chase, speculated Albuquerque lawyer Dave Giddens, who practices bankruptcy, foreclosure and business law.

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“In the outlying areas of the state, I think you’d probably find the community bankers trying hard not to foreclose,” he said. “They’re more willing to work with the homeowners.”

Albuquerque likely has a higher concentration of mortgages held by the mortgage-lending giants, he said.

These big banks helped finance the housing bubble, then, after it burst, were recipients of the $700 billion bank bailout of 2008. Two years later, they were front and center in the so-called “robo-signing” scandal.

The robo-signing scandal centered on seven big mortgage lenders and their law firms rubber-stamping foreclosure actions against homeowners. Subsequent negotiations with state and federal agencies led to cash settlements and new foreclosure processing procedures.

The settlements, however, didn’t make the foreclosure problem go away.

“We’re still seeing fallout from the bursting of the housing bubble,” Giddens said. “The law firms that represent (the big banks) — foreclosure mills, if you will — still crank them out and file them.”

New Mexico’s judicial process begins with the filing of a lawsuit in state District Court against a homeowner defaulting on a mortgage. If completed in court, the process ends with either a court-ordered sale or repossession.

The pace of the initial lawsuits statewide has held steady for the past three years: an average of 563 a month in 2010, about the same in 2011, and 558 a month in 2012. The consistent pace of the initial filings clearly points to a sustained foreclosure problem, particularly in Albuquerque.

What is different over the past three years is the increasing share of initial lawsuits versus all foreclosure-related filings, such as court-ordered sales and repossessions. Initial lawsuits accounted for 51 percent of all homes with foreclosure-related filings in 2010, jumping to 77 percent in 2011 and 70 percent in 2012.

The increased share is the result of more and more foreclosures being settled out of court, commonly through a short sale. Short sales invariably involve distressed properties, but not necessarily homes in the formal foreclosure process.

Closed short sales have been on a steady increase in the metro, climbing from 537 in 2010 to 694 in 2011, then jumping by 39 percent to 964 in 2012, said Peter Veres, a real estate broker who specializes in short sales at ReMax Elite.

Short sales would appear to be on track for another big increase this year. During the first month of 2013, there were 509 short-sale homes on the market in the metro, another 532 pending short sales and 45 closed short sales, Veres said.

“Banks have started to be more favorable towards short sales,” he said. “For example, Bank of America now has a cooperative short sale program which has made it very easy for sellers to see if they qualify for a short sale.”

Historically, the problem with short sales has been that they were difficult and took a long time to complete, both Giddens and Veres said. Some lenders are still like that today, Veres said.

“Buyers get frustrated and walk away from the deal,” he said. “This could result in a foreclosure.”