Issue 2, 2007
Federal Reserve Bank of Dallas

Quantifying the Foreclosure Issue

The first challenge of any foreclosure study is quantifying the problem. Several online sources publish data for use by real estate investors, but these reports tend to overstate the numbers because foreclosure filings may be reported multiple times for a single property. The Mortgage Bankers Association (MBA) bases its delinquency and foreclosure report on data obtained from a sample of over 44 million mortgage loans serviced by mortgage companies, banks, thrifts and credit unions across the U.S. One of the categories the MBA tracks is “seriously delinquent” loans, which reports all loans 90 days or more past due plus all loans in some stage of foreclosure.

The chart shows the trend of seriously delinquent loans by loan category in Texas since 2001. The quarterly number of seriously delinquent mortgage loans as a percentage of conventional prime mortgage loans in Texas remained relatively stable during 2001–06, fluctuating between 0.6 percent and 1.2 percent. However, the percentage of seriously delinquent subprime adjustable rate mortgage (ARM) loans increased significantly, from about 7 percent of all subprime ARMs to almost 12 percent. Other ARM categories show increases in seriously delinquent loans as well. However, among fixed-rate mortgage (FRM) loans, serious delinquency has trended downward since late 2005.

For a closer look at specific areas within Texas, RealtyTrac, an online commercial provider of foreclosure information, published a list of the 100 metropolitan statistical areas (MSAs) in the U.S. with the highest foreclosure rate relative to the total number of households in the MSA. For the first half of 2007, Texas MSAs held seven places on the Top 100 list.

In a study for CNNMoney.com, RealtyTrac also surveyed foreclosure information by ZIP code. Twenty-two Texas ZIP codes made the list of 500 U.S. ZIP codes with the most foreclosure filings for the three months ended June 15, 2007. In contrast, California and Florida each had 72 ZIP codes on the list. All but three of the 22 Texas ZIP codes were located in the Dallas–Fort Worth area. Eleven were located in the Fort Worth–Arlington metro area. Cleveland was number one on the national list with 783 foreclosure filings.

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About Banking and Community Perspectives Federal Reserve Bank of Dallas Community Affairs Office P.O. Box 655906 Dallas, Texas 75265-5906 Gloria Vasquez Brown Vice President gloria.v.brown@dal.frb.org Alfreda B. Norman Assistant Vice President and Community Affairs Officer alfreda.norman@dal.frb.org Wenhua Di Economist wenhua.di@dal.frb.org Julie Gunter Senior Community Affairs Advisor julie.gunter@dal.frb.org Jackie Hoyer Houston Branch Senior Community Affairs Advisor jackie.hoyer@dal.frb.org Roy Lopez Community Affairs Specialist roy.lopez@dal.frb.org Elizabeth Sobel Community Affairs Specialist elizabeth.sobel@dal.frb.org   Editor: Jennifer Afflerbach Designer: Darcy Melton Researcher and Writer: Julie Gunter The views expressed are those of the authors and should not be attributed to the Federal Reserve Bank of Dallas or the Federal Reserve System. Articles may be reprinted on the condition that the source is credited and a copy is provided to the Community Affairs Office.