The States With the Most Homes in Foreclosure

Five major U.S. banks accused of foreclosure abuses have agreed to a $26 billion settlement with the government, the largest payout from banks arising from the financial crisis. The amount, which will include aid from banks in the form of loan forgiveness and refinancing, is intended to help homeowners avoid mortgage default and foreclosure. Most economists believe this is a step in the right direction, albeit only a small one.

Homeowners in at least 49 states represented in the agreement will benefit, though some states have more homes in trouble than others. California, one the hardest-hit states in the foreclosure crisis, will reportedly receive mortgage relief of up to $18 billion. Based on Corelogic’s national foreclosure report released yesterday, 24/7 Wall St. identified the states with the highest foreclosure rates.

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Many of the states with the highest foreclosure rates experienced the worst of the housing crisis. However, analysis by 24/7 reveals that the primary driver of higher foreclosure rates is a lengthy foreclosure process.

Nearly all of the states with the highest rates also have the longest foreclosure periods. The average foreclosure process for the nation is 140 days. The average foreclosure process for the eleven states with the highest foreclosure rates is 220. As a result, many homes foreclosed in 2011 in these states were actually at the end of a process that began more than a year ago. New York, one of the states with the worst foreclosure rates, has an average processing period of 445 days.

The reasons why the foreclosure processing period is longer in these states is because it usually involves the court system. Judicial foreclosures are handled by the court and usual include filing motions and seeking a final judgement from a judge. Nonjudicial foreclosures, which tend to take less time to process, are governed by state law and do not require court intervention. Nine of the 11 states with the highest foreclosure rates have a judicial-only foreclosure process.

While some of the states with high foreclosure rates have had substantial improvements in their economies, others continue to be hit hard. In Nevada and Florida, two states with the highest foreclosure rates, homes lost roughly half of their value over the past five years — and prices are still falling. Foreclosures that began several years ago and that are still active cannot be the only reason nearly 12% of Florida’s homes with mortgages were in foreclosure last year. Home prices in the state fell nearly 50% over the past five years, unemployment remains extremely high, and 17.4% of people with mortgages in the state were 90 days or more late on their mortgage payments.

24/7 Wall St. reviewed housing data provided by Corelogic to rank the states that had the highest percentage of homes with mortgages that were in foreclosure in 2011. Corelogic’s report also provided the percentage of homeowners that were delinquent on their mortgages for 90 days or more last year. In order to highlight the conditions of these state economies and housing markets, we included unemployment rates from the Bureau of Labor Statistics and home price changes from Fiserv-Case Shiller.

These are the 11 states with the highest foreclosure rates.

11. Indiana > 2011 foreclosure rate: 3.5% > December, 2011 unemployment: 9% (13th highest) > Home price change (2006Q3-2011Q3): -5.2% (37th largest decline) > Processing period: 261 days

Over the past five years, median home prices in Indiana fell just 5.2%, far less than 14.7% the average decline for all 50 states. However, the 9% unemployment rate in the state is the 13th highest in the country. Of Indiana residents with mortgages, 6.6% were delinquent on payments for 90 days or more at some point during the year, and 3.5% of mortgaged homes were in foreclosure last year. The processing period for a foreclosure in the state is 261 days, one of the longest periods in the country.

10. Ohio > 2011 foreclosure rate: 3.5% > December, 2011 unemployment: 8.1% (21st highest) > Home price change (2006Q3-2011Q3): -14.1% (21st largest decline) > Processing period: 217 days

Ohio’s unemployment rate in December, 2010 was 9.5%, the 17th-highest in the country at the time. By the end of 2011, the employment situation improved and the unemployment rate fell to 8.1%. Still, foreclosure rates were one of the highest in the country. Of the state’s mortgaged homes, 3.5% were in foreclosure last year, and 6.9% of mortgages were delinquent on mortgage payments for 90 days or more. Over the next year, Fiserv-Case Shiller projects home prices are going to further decline in Ohio by 3.8%, the eighth-biggest decrease in the country. Foreclosures in the state take 217 days on average to process.

9. South Carolina > 2011 foreclosure rate: 3.7% > December, 2011 unemployment: 9.5% (9th highest) > Home price change (2006Q3-2011Q3): -10.2% (29th largest decline) > Processing period: 150 days

Homes in South Carolina lost 12.5% of their value over the past three years, with home prices falling 4.6% in 2011 alone. At the end of 2010, 10.9% of the state’s labor force was jobless. While the unemployment rate fell to 9.5% by December 2011, it is still one of the highest rates in the U.S. Over the past 12 months, 6.7% of mortgages in the state were delinquent for 90 days or more on payments, and 3.7% of mortgaged homes were in foreclosure in 2011.

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8. Hawaii > 2011 foreclosure rate: 3.8% > December, 2011 unemployment: 6.6% (13th lowest) > Home price change (2006Q3-2011Q3): -20.2% (16th largest decline) > Processing period: 220 days

Between the third quarter of 2006 and the third quarter of 2011, home prices in Hawaii fell by 20.2%, the 16th-biggest decline in the country. Unemployment remains relatively low in the state. It has increased over the past 12 months, however, even as the national rate decreased. Despite the relatively low unemployment, 6.6% of mortgages were 90 days or more delinquent on payments last year. Over the same period, 3.8% of homes in the state were in the foreclosure process. In Hawaii, foreclosures take 220 days to process.

7. Connecticut > 2011 foreclosure rate: 4.1% > December, 2011 unemployment: 8.2% (19th highest) > Home price change (2006Q3-2011Q3): -16.6% (19th largest decline) > Processing period: 62 days

Home prices in Connecticut fell 16.6% between the third quarter of 2006 and the third quarter of 2011. According to Fiserv-Case Shiller, they will fall an additional 2.5% by the third quarter of this year. According to CoreLogic, 7.2% of mortgage owners did not make payments for 90 days or more last year. And 4.1% of all mortgaged properties in the state were in foreclosure last year. Connecticut is one of the few states in which courts decide whether those in foreclosure can redeem their status by paying what they owe. This can lead to foreclosures taking much longer to go through.

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6. Maine > 2011 foreclosure rate: 4.2% > December, 2011 unemployment: 7% (19th lowest) > Home price change (2006Q3-2011Q3): -6.0% (15th smallest decline) > Processing period: 240 days

Maine’s economy was not one of the worst affected by housing collapse. Home prices fell only 6% between 2006 and 2011, the 15th smallest decline. Also, unemployment in the state is exceptionally low with just 7% of the workforce without a job. Maine, however, had the sixth-highest foreclosure rate in the country last year, with 4.2% of homes with mortgages in the foreclosure process. One explanation could be the high delinquency rate in the state, as 6.9% of mortgage owners didn’t make a payment for 90 days or more in 2011. Another reason could be Maine’s lengthy foreclosure approval period. It takes 240 days for a mortgage to process, the fifth-longest period in the country. This means that a good percentage of homes that began the foreclosure process in 2010 were still in foreclosure last year.

5. New York > 2011 foreclosure rate: 4.6% > December, 2011 unemployment: 8% (23rd highest) > Home price change (2006Q3-2011Q3): -13.6% (23rd largest decline) > Processing period: 445 days

New York’s processing period for foreclosures is 445 days — by far the longest among all states. This could explain why the state has such a high foreclosure rate for mortgaged homes. And although New York’s housing prices didn’t decline as much as in other states, the 13.6% decline since the third quarter of 2006 is still quite large. Moreover, home prices are forecast to decrease among the most in the country over the next year and drop nearly 6% by the third quarter of 2012.

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4. Nevada > 2011 foreclosure rate: 5.3% > December, 2011 unemployment: 12.6% (the highest) > Home price change (2006Q3-2011Q3): -59.3% (the largest decline) > Processing period: 116 days

For Nevada, things aren’t going well. Its already dismal economy and housing situation are still getting worse. Nevada didn’t experience a glut of foreclosures last year because the state has a particularly lengthy foreclosure process. Between the third quarter of 2006 and the third quarter of 2011, the median home value in the state tumbled by nearly 60%. By the third quarter of this year, Fiserv-Case Shiller projects home prices will fall an additional 13.9% — by far the worst drop in the country. Nevada has the worst unemployment rate in the country, at 12.6%, and 13.4% of mortgage owners were delinquent on payments for 90 days or more last year.

3. Illinois > 2011 foreclosure rate: 5.4% > December, 2011 unemployment: 9.8% (7th highest) > Home price change (2006Q3-2011Q3): -29% (7th largest decline) > Processing period: 300 days

Home prices in Illinois have dropped 29% from the third quarter of 2006 — one of the largest declines in the country. It also takes 300 days to process foreclosures in the state. And Illinois residents are not lining up to pay off their mortgages either. The state’s 90+ day delinquency rate for mortgage payments is 9.2%, the fourth highest in the country.

2. New Jersey > 2011 foreclosure rate: 6.4% > December, 2011 unemployment: 9% (13th highest) > Home price change (2006Q3-2011Q3): -22.6% (14th largest decline) > Processing period: 270 days

New Jersey has one of the longest foreclosure processing periods in the country at 270 days. The state also has a 90+ day delinquency rate of 10.6%, which is the third highest rate in the country. On top of this, the state’s housing market is not expected to rebound for some time. In fact, home prices are forecast to decrease an additional 3.9% by the third quarter of 2012.

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1. Florida > 2011 foreclosure rate: 11.9% > December, 2011 unemployment: 9.9% (6th highest) > Home price change (2006Q3-2011Q3): -49% (3rd largest decline) > Processing period: 135 days

Florida’s 2011 foreclosure rate for mortgaged homes is not only the highest in the country, but it is almost twice that of New Jersey — the state with the second-highest rate. As with many other states on this list, Florida has a very long foreclosure processing period of 135 days. There is more to the state’s high foreclosure rate than just that, however. Home prices dropped 49% since the third quarter of 2006, which is the third-largest drop in the country. The state’s unemployment rate of 9.9% is among the highest as well. Finally, the state’s mortgage payment delinquency rate is 17.4% — the nation’s absolute highest.