While the number of nationwide foreclosure filings increased nearly 30 percent from February 2008 to February 2009 — and states such as Nevada, Arizona, California and Florida continue to post the highest foreclosure rates — often overlooked are those states that have consistently posted the nation

While the number of nationwide foreclosure filings increased nearly 30 percent from February 2008 to February 2009 — and states such as Nevada, Arizona, California and Florida continue to post the highest foreclosure rates — often overlooked are those states that have consistently posted the nation’s lowest foreclosure rates.

With one foreclosure filing for every 60,062 households, Nebraska had the lowest foreclosure rate in the nation in February, followed by Vermont, which posted one foreclosure filing for every 28,312 households, according to RealtyTrac, a foreclosure data company (see Inman News).

“We (Nebraska) never got hot and heavy in the subprime market. We’re a conservative state when it comes to lending,” said Randy Forest, president of the Nebraska Association of Mortgage Brokers and vice president of Omaha-based Security 1 Mortgage.

Diane Smith, executive director of the Vermont Mortgage Bankers Association, cited the low percentage of subprime loans as the first reason for Vermont’s consistently low foreclosure rate.

“It’s a conservative type of environment in terms of the lenders trying to match the customer to the product,” Smith said, adding the common loan product utilized by Vermonters has been the traditional 30-year fixed-rate loan.

Unlike some states, where homes appreciated in price by 20-30 percent per year during the early to mid-portion of this decade, Nebraska and Vermont homes did not experience rapid price appreciation.

“We never had more than 3 or 4 percent appreciation per year,” said Vince Leisey, president elect of the Nebraska Association of Realtors and broker-owner of Prudential Ambassador Real Estate-Omaha, adding the median price of an Omaha-area home is around $140,000.

In Vermont, homes appreciated in price by 10-12 percent a year from 2001-05, which isn’t considered excessive, according to Leslee Mackenzie, president elect of the Vermont Association of Realtors and president of Coldwell Banker Hickok & Boardman Realty, adding the median price of a home is $250,000.

In addition to the lack of rapid price appreciation spanning 2001-05, the limited new residential construction in Nebraska and Vermont also contributes to the low foreclosure rates.

“We (Vermont) have a lot of restrictions in terms of land use and environmental impacts. It dampens the opportunity for tract development,” Smith said. “We don’t have an excessive supply of properties where there would be a push to get people into those homes.” …CONTINUED

The lack of new-home construction, combined with below-average price appreciation in previous years, equated to fewer speculative buyers during the last housing boom in some markets.

“People were trying to flip homes (elsewhere) and you didn’t have that in Nebraska,” Forest said.

Of the foreclosures that have occurred in Vermont, the majority are not a result of the loan product, Smith said — rather, they stem from job loss, divorce or other hardships.

When eyeing foreclosure rate data by state, it is hard to ignore that lesser-populated states such as Vermont and Nebraska typically have some of the lowest foreclosure rates nationwide. However, it isn’t always the case that states with among the highest total population have among the highest foreclosure rates.

New York, the third most populous state in the nation, with an estimated 2006 population of 19.3 million, had the 16th lowest foreclosure rate in the nation in February, RealtyTrac reported.  With one foreclosure filing for every 1,846 households, New York also had the lowest foreclosure rate amongst the top nine most populous states during February. This was despite a 23 percent month-to-month increase in foreclosure filings from January 2009 to February 2009, according to RealtyTrac.

Of the more than 19 million New York residents, the majority live within the 10-county New York metro area, with more than 8.2 million people living in New York City, according to U.S. Census Bureau data.

While some boroughs of New York City such as Queens and Brooklyn have experienced a noticeable rise in foreclosure filings during the past 12 months, due to the previous rate of predatory lending and the type of housing found there, other boroughs such as Manhattan have not experienced such an uptick in foreclosure-related activity, according to Michele Peters, a broker-owner of Weichert Realtors — Peters Associates, and a lawyer with foreclosure expertise.

Peters and Philip Kiracofe, president of the Manhattan Association of Realtors, both cited the large amount of co-op properties within Manhattan as the reason for the comparatively lower number of foreclosure filings.

“Seventy-five percent of the buildings (in Manhattan) are cooperative. The requirements for ownership in a co-op have always been high,” Peters said.

Requirements include a prospective homeowner providing “substantial financial information” to the co-op. The prospective buyer typically must be able to put 20 to 30 percent down at the close of the transaction and have proof of substantial assets in case problems arise in the future. …CONTINUED

“If a bank approves you for a mortgage, the co-op has another approval process,” Kiracofe said. “It’s the model for how financial operations should work.”

Of the foreclosure activity in Manhattan, the majority involves condominiums, as this housing type represents the new residential construction that has occurred in the borough during recent years. 

In other boroughs, such as Queens, the situation is the opposite as the majority of foreclosure activity has involved single-family homes.

While Manhattan has experienced less foreclosure activity than neighboring boroughs in previous months, the amount of foreclosure filings and short sale attempts recently shot up, a reaction to recent job loss activity.

From January to February the amount of foreclosure filings increased 549 percent, though this still reflects a very small number of foreclosure filings — there were 331 residential properties receiving some type of foreclosure filing in February, compared to 60 in January, according to RealtyTrac.

Peters forecasts that the amount of short sales and short-sale attempts will continue to increase in the coming months, and the majority of future foreclosure filings will involve condos or second homes.

Kiracofe said those who have lost their jobs and live in co-ops typically have enough reserves and assets to continue to make payments, a result of co-op’s high ownership requirements prior to a purchase.

Outside the New York metro area, foreclosure conditions appear similar to Vermont and Nebraska, as subprime lending played a very small role, resulting in low foreclosure activity, according to Sal Prividera, spokesperson for the Albany-based New York Association of Realtors. The association is not anticipating an noticeable uptick in foreclosure filings in the rural portions of the state, he added.

Erik Pisor is a freelance writer in California.


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