After changing its reporting methods two years ago in response to accusations that it was overstating the number of homes subjected to foreclosure-related filings, data aggregator RealtyTrac is facing the opposite problem: a newspaper analysis suggesting the company undercounted properties scheduled for auction in the Atlanta, Ga., area.
The Atlanta Journal-Constitution said it reviewed legal notices published in newspapers in five metro Atlanta counties, counting 7,462 properties scheduled for auction in April. RealtyTrac, in contrast, reported that 3,746 properties were subjected to auction notices that month, the newspaper said.
RealtyTrac is standing behind the methods it uses to collect and report foreclosure-related filings, but says its reports should not be held to the same standards as statistics compiled by government agencies for the purpose of making public policy decisions.
The company says the numbers it reported for the Atlanta area in April were lower than the newspaper’s because lenders often postpone scheduled auctions of foreclosure properties, and RealtyTrac doesn’t want to double-count properties that it’s reported on before.
All of the properties identified by the newspaper are likely to be in RealtyTrac’s database, but some wouldn’t have been tallied in the April numbers if they’d been counted in previous reports, the company said.
"Our monthly reports are based on new activity, and we would be grossly and severely exaggerating the problem if we were reporting every time a lender rescheduled an auction," said Rick Sharga, RealtyTrac’s vice president of marketing.
Sharga said it’s increasingly common for lenders to postpone scheduled auctions of foreclosure properties. In some cases, they may be engaging in workouts or loan modifications with borrowers.
But often, he said, lenders are reluctant to go through with a scheduled auction because they aren’t willing to offer big enough discounts to entice buyers. The overwhelming percentage of properties that go to the auction block in some markets end up back in lenders’ hands, and banks often "don’t want to take that much inventory back in one fell swoop," Sharga said.
RealtyTrac follows properties through three stages of foreclosure: default, notice of auction, and repossession by banks (when properties become "REO," or real estate-owned). Each stage of the process can generate one or more filings against a property.
To avoid double-counting, RealtyTrac checks to see if the same property has been subjected to more than one foreclosure-related filing during the month or quarter. If so, only the most recent filing is counted in its summary reports.
If a property has been subjected to the same type of filing, such as an auction notice, more than once during the estimated foreclosure time frame for the state the property is in, RealtyTrac does not count the subsequent filings in summary reports issued as press releases to generate publicity for the company. (The latest auction information is made available in the company’s property database, which is used by investors and real estate professionals looking for bargains.)
RealtyTrac — which tracks properties through the foreclosure process in 2,200 counties that represent an estimated 90 percent of U.S. population nationwide, including all areas of Georgia — developed the system for avoiding double-counting to counter previous allegations that its reports were overstating the number of homes subjected to foreclosure-related filings. …CONTINUED
The Atlanta Journal-Constitution said its 2007 review of RealtyTrac data "prompted RealtyTrac to admit serious inaccuracies in Georgia," with foreclosure-related filings in the state rising by 14 percent in the year ending July 2007, rather than the 75 percent originally reported by the company.
The latest article, in Sunday’s Journal-Constitution, raises "a fair question," Sharga said. But, he said, "That we used to get dinged for what people considered double-counting, and we are now accused of undercounting, is the height of irony."
The Journal Constitution article cites experts from Emory University and Georgia Tech, who say policymakers need accurate information about foreclosure statistics. The federal government doesn’t collect such information, and policymakers often cite statistics from RealtyTrac, which relies on subscribers looking to buy distressed and foreclosed properties at bargain prices.
When the Congressional Joint Economic Committee issued a report on subprime lending in the spring of 2007, the Mortgage Bankers Association complained that the report relied "heavily on foreclosure estimates from RealtyTrac, an Internet-based firm specializing in marketing foreclosed properties" (see story).
The MBA, which produces its own quarterly report on delinquencies and foreclosures that doesn’t include "private-label" lenders who financed many subprime loans during the housing boom, claimed that before RealtyTrac changed its methodology, the company’s reports overstated the number of properties subjected to foreclosure filings by about 30 percent.
The Colorado Division of Housing began compiling its own quarterly statistics after taking issue with RealtyTrac’s numbers.
Sharga said RealtyTrac has been in discussion with staff members of congressional committees and officials at the state level about creating a public-private partnership to compile foreclosure statistics.
"I think there needs to be a better process, and the quickest way there would be some kind of partnership among parties already doing this, rather than starting from scratch," Sharga told Inman News.
One problem is that the rules for foreclosure vary from state to state, and data must be gathered at the county level. Less than 10 percent of counties offer information online, Sharga said.
While RealtyTrac works with academics and policymakers on a regular basis, "We don’t pretend to do a scientific analysis (of the data) — we just collect it and report it, and leave it to others to analyze."
Because of RealtyTrac’s prominence as a provider of foreclosure statistics, "People almost view us as a government entity right now, and when we miss a (property) record here and there, they get angry with us."
In recent years, the company’s reports "have been under the most severe microscope imaginable," Sharga said. "Every time an issue’s been raised, we do as good a job as possible perfecting what by nature is very imperfect data, and the complaints are fewer and fewer as time goes by. We stand by the numbers."
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