As a result of the onslaught of articles questioning RealtyTrac’s latest report, the company has offered insight into its data collection methods and its role in foreclosure data reporting. In the company’s defense, Rick Sharga, vice president of marketing, has been quoted as standing by the numbers.

RealtyTrac’s formal position regarding the Atlanta data exposé can be found in an Inman News article titled, “RealtyTrac numbers under fire in Atlanta,” published on June 23, 2009. According to the article written by Matt Carter, “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.”

Interestingly enough, while the company states their data should not be used to the same standards as government agencies or for influencing public policy, the company has touted offering the data for that exact use.

In fact, a press release located directly on the RealtyTrac Web site states, “RealtyTrac’s foreclosure data has also been used by the Federal Reserve, FBI, U.S. Senate Joint Economic Committee and Banking Committee, U.S. Treasury Department, and numerous state housing and banking departments to help evaluate foreclosure trends and address policy issues related to foreclosures.”

It seems RealtyTrac has always been the first to proclaim their information is used for governmental agencies. In the very same article that initiated the latest accusatory whirlwind, a RealtyTrac spokesman, Daren Blomquist, even attested to the fact by stating that “both federal and state governments have asked RealtyTrac for its data.”

It seems that although the company knows their information is inaccurate, it still lauds the fact that the data is used by government agencies. A simple logical argument would conclude that RealtyTrac’s data should then not be used by government agencies.

Foreclosure Research was one of the first online publications to report that RealtyTrac numbers had yet to show much improvement from previous years’ allegations of inaccuracy.

There have been a whole slew of news articles pin-pointing current data discrepancies from the listing provider. The first of these coming from the Atlanta Journal-Constitution published on June 21, 2009, titled “Foreclosure numbers don’t add up.” Author Carrie Teegardin assessed that RealtyTrac actually under reported foreclosure notices for the month of April by almost 4,000 filings, a disparity of nearly 100 percent.

The AJC concluded the difference following an analysis of newspaper records for five metro Atlanta counties. Because Georgia is a non-judicial state for foreclosures, there are no court records on the proceedings.

The article offered an excerpt from a local foreclosure expert, who described Realty Trac’s method as “not scientifically rigorous.”

Another issue that has been noted by Foreclosure Research in the past is the lack of coverage in rural areas. Teegardin notes that in Georgia, Realty Trac “reported that April’s foreclosure tally represented a 21 percent increase over the previous year. But the company made no adjustment for the fact that it collected foreclosure data in about 100 of Georgia’s 159 counties last year but expanded to statewide coverage this year.”

Daren Blomquist responded by stating, “We don’t believe it makes any significant difference in the percentage change,” regarding the tallying of additional counties.

If this were the case, let’s do some quick calculations under this supposition.

According to the most recent report 1 out of 377 homeowners in Georgia received at least 1 foreclosure notice in May. You could then apply this figure to the areas that are not counted or at least were not counted last year.

Sample average for rural populations in Georgia*: 13,557. 35 foreclosures per county times 59 counties not counted, equal an additional 2,121 foreclosure filings per month.

April 2008
7,136 Notice of trustee sales plus 2,050 REOs, plus an additional, estimated 2,121 = 11,307 total.

April 2009
7,809 Notice of trustee sales plus 3,712 REOs equals a total of 11,521

Considering this information, Georgia foreclosures only increased 1 percent from April 2008 to April 2009, not 21 percent. If you ask me, this is a very ’significant change’ and perhaps this article can serve as a lesson on how the company can improve upon its scientific rigor in the future.

*Sampling average taken from counties with less than 25,000 in population.

Looking back on the last six months of 2009, foreclosures have seen their share of increases, decreases and record highs- or at least depending on who you ask. This inconsistency leaving the country to wonder what lies ahead for the economy. Many economists and real estate experts predict foreclosures will increase to highs greater than seen in years prior, while others predict a softening.

One thing is certain. The media has made it quite apparent that the worst is yet to come, highlighting reports of heightening foreclosure filings, or notices of default. What hasn’t been reported is the fact that REOs, bank repossessions, foreclosures, fully-defaulted properties, and all other variations of the word have decreased over the last 9 months.

This is a great sign. While it is not known whether one factor is directly related to the decrease in actual foreclosures, most likely it is a combination of all efforts.

In homage to president Obama, let Foreclosure Research be the first to announce “there is change coming” to the real estate market.

More Q2 reports of apparent foreclosure records are hitting the media, with some of the most misguided reporting seen yet. Surprisingly, the particular article under scrutiny comes from Reuters, one of the most respected news wires in the world.

The article titled, “U.S. foreclosures jump to record high,” written by Lynn Adler, is a prefect example of the media’s tendency to report on “doom and gloom” or worse yet, give heed to more dramatic suppositions.

The headline, “U.S. foreclosures jump to record high” leaves out a rather important fact. According to the article the record comes from an increased amount of foreclosure filings- or default notices. As Foreclosure Research continues to point out, these filings should not be considered FORECLOSURES. The title makes a blatant error of this.

What is worse is the fact that four paragraphs down where the low-priority information is located, comes the most important observation of all; that “bank repossessions, know as real-estate owned or REOs, fell on a monthly and annual basis to the lowest level since March 2008.” So perhaps a more accurate, less polluted headline would have read “Foreclosures (the proper use of the word) decreased to lowest levels since March 2008.”

Another interesting observation is how the statement expands on all the synonyms of REO except for its most pertinent one- FORECLOSURES.

The Plea:
A note to all reporters; given the state of the economy please be more accurate when reporting on foreclosures. Also, be sure to inform yourselves on the foreclosure process and the meanings of all its word associations. Most importantly, try using the good news in the headline for once.

Yet another economically depressing article has made its way into the media and with an aptly named titled, “And Now For This Morning’s Gloom…” The article, written by Henry Blodget and published in The Business Insider on May 5, 2009 offers more insight into foreclosures, job loss, and the economy.

However, there was one noticeable red flag where there was a reference to an unlikely source when discussing the implications of foreclosures on job loss. The following is a snippet from the article:

“According to RealtyTrac, job losses result in a home foreclosure 10% to 15% of the time. If job losses narrow from the monthly average of 670,000 in the first quarter to 325,000, almost 3 million more jobs will be lost before year end. That will translate into another 300,000-450,000 foreclosures, and an unemployment rate of almost 11%. But what if that estimate of job losses is too optimistic?”

The first question that should have come to a reader’s mind is, ’since when does RealtyTrac monitor job loss and general economic statistics?’ Which then begs the second question, ‘if one can’t monitor their own industry with accuracy, why try and gauge another?’

In an attempt to try and identify the source of the job loss statement, I did a search on Google News and on the RealtyTrac site for job loss figures. In both searches there was no mention of RealtyTrac reporting on job loss in either outlet.

Considering this information, there are only a couple of conclusions. One, RealtyTrac gave a very unofficial statement to a news reporter, in order to further broaden their media reach; or two, the reporter made their own assessment based on RealtyTrac’s estimated and quasi-convoluted figures.

Referring back to a recent Foreclosure Research article highlighting the law past by the state of Colorado, makes it illegal to utilize unofficial foreclosure figures when used to pass legislation or to gauge the economy. Translation: figures from a commercial listing service should not be used to sway opinion regarding economics.

If the reporter did utilize RealtyTrac’s foreclosure figures to extrapolate a job loss statistic, then most likely the concluding statistic is false. In another respect, the statement does not even specify whether job loss results in a ‘[pre]foreclosure or a regular foreclosure 10% to 15% of the time,’ as we’ve seen many reporters in the past confuse the two phases. And the fact that RealtyTrac always combines these two figures in their press releases is yet another concern.

Bottom line is that not only should there be a cautionary note when utilizing commercial foreclosure statistics, but those statistics should not be used to form an even greater, more influential statistic, especially when coming from an unqualified source.

It looks like the foreclosure fishermen are at it again. There is no telling just how big… the foreclosure crisis is getting. The size and method of catch all depend on which statistical fisherman you ask.

RealtyTrac is just one purveyor of such foreclosure fish stories. Their figures have been up for debate for several years now. In the most recent press release the foreclosure rate per household left out one major piece of information. According to the release, titled “Foreclosure Activity Increases 9 Percent in First Quarter,” the company states that “one in every 159 U.S. housing units received a foreclosure filing during the quarter. However, this is incorrect.

According to the beginning of the press release, RealtyTrac explains that the Q1 report includes “foreclosure filings — default notices, auction sale notices and bank repossessions.” As has been exposed in the past, many of these foreclosure properties can have up to 3 filings. For example, one home first receives a default notice, then receives and auction notice; and finally the home is figured in with the REO repossessions.

Considering this, RealtyTrac should have offered the following statement: one in every 159 U.S. housing units received [AT LEAST one (more like two)] foreclosure filings during the quarter.

Upon further analysis, the entire statement still contains falsities because the filings would be much less if they were based on per single household foreclosures.

The important number continues to be REOs, actual bank repossessions, which were only 190,543. Considering this figure combined with U.S. Census figures, the more accurate and pertinent statement would be as follows: 1 in 671 housing units were foreclosed during the first quarter of 2009.

There is another error in the report when RealtyTrac mentions how many properties received the fillings. In the release the company states, “Foreclosure filings — default notices, auction sale notices and bank repossessions — were reported on 803,489 properties.” This should actually read, 803,489 filings were reported on x amount of properties. Not vice versa.

A couple of years ago RealtyTrac was in some hot water for over-inflating foreclosure statistics for the state of Colorado. According to one Foreclosure Article in The Seattle Times, published online on June 16, 2007, “RealtyTrac reported 54,747 foreclosures last year — one of the highest in the nation. The state’s Division of Housing, however, said the actual number was 28,453 and publicly chastised the firm for inflating numbers.”

The article titled, “Numbers from foreclosure statistics company questioned,” continued by stating the company doubled, even triple-counted foreclosures for a single property.

The article was just one in a slew of articles that offered somewhat of a public outcry for more accurate figures. The main concern, that the figures being reported by non-governmental, for-profit companies were being used in governmental review, and eventually considered in proposed law to help curb the onslaught of foreclosures.

Now two years later, in response to these inaccuracies, Colorado has signed into law a new housing bill, aimed to collect and report its own statewide foreclosure statistics. A Colorado Springs blog reporting on the issue states, “concerns have been raised that foreclosure numbers for Colorado are inflated versus other states that have already implemented standardized reporting procedures. This can put Colorado at a disadvantage when national numbers are analyzed and compared.”

The new housing bill (HB 1196) will help regulate foreclosure reporting, at least for government and media use in the future.

Along the same vein as prior articles on responsible reporting in the media, there seems to be more awareness towards media outlets touting gloom and doom figures. The people are beginning to publicly question the backings of all these new reports.

The latest of these articles comes out of the editorial/opinion column in the Outlook, a local paper in Oregon. Published on April 8, 2009, local realtor Jon Hull voices his opinion in his letter, “Responsible reporting vs. doom and gloom.” In the letter, Hull describes how journalism has “helped to stymie consumer confidence across our nation,” and helped “to cause fear and alarm in our community without including any of the positive aspects, which offer balanced reporting.”

Hull states that one of the main causes of doom and gloom reporting comes directly from the companies reporting the information. In this case the “source of statistics is a foreclosure revenue-generated based Web site out of California,” Realty Trac. Hull states that according to RealtyTrac, Oregon is ranked 9th worst in foreclosures while various other companies state it is has some of the lowest foreclosure rates in the country.

Hull continues by stating, “Numbers can be made to look however you want, (isn’t that how we got in this mess) or can be pulled from sources, which in this case apparently support the doom and gloom article presented.”

As foreclosure Research has reported in the past… There are always two sides to every (foreclosure) story.

Throughout Foreclosure Research’s endeavor to find the truth behind foreclosure data, many different avenues have been explored to help demystify foreclosure statistics. Some of the more obvious causes of these untruths so to speak, came from the inaccuracies of several foreclosure listing providers, and from faulty reporting in the media.

However, the underlying truth behind the economy, foreclosures, and the housing market downturn are unarguably complex. Yet many factors are identifiable and some more pertinent than others.

One interesting perspective that has yet to be noted comes from Jay Brinkmann, a chief economist for the Mortgage Banker’s Association. In an article titled, “Looking at another side to a foreclosure report,” published on March 28, 2009 in the Houston Chronicle, Brinkmann had a separate take on the latest foreclosure figures. The figure in question was from an article on the Reuters wire titled, “One in 8 U.S. homeowners late paying or in foreclosure.”

The Chronicle article tries to explain the difference between a mortgage foreclosure and actual homeowners that are losing their homes. Here is an expert of Brinkmann’s observation:

“The ‘One in eight homeowners either in foreclosure or behind in their payments’ is wrong. For starters, it’s one in eight mortgages — not homeowners — and this distinction is very, very important. When you look at the number of mortgages out there, it includes lots of investment/rental properties.”

Brinkmann continues to explain that while there are “x” amount of mortgage foreclosures, doesn’t necessarily correlate to families being kicked out of their homes. He used an example of a New Jersey grad student who bought 3 condominiums in Florida, with over-leveraged mortgages. Or an attorney in Phoenix who purchased 30 homes, both investors stating the homes were each “owner occupied.”

These pseudo-investors gambled with the market and lost. They now comprise a large percentage of “homeowners” walking away from their mortgages and ultimately contributing to the grim statistics in the media. They are not to be confused with those who have in deed suffered economic hardship, but are rather failed speculators.

Just two years ago, RealtyTrac was in some hot water over counting foreclosure filings multiple times for a single property and providing inflated foreclosure statistics to the media. Since then, the company has said to have changed its data collecting and reporting methods. However, as seen in last week’s articles, many of these duplicate listings are still appearing throughout the media.

On their statistics page, readers can see the different categories for filings; however, the actual numbers are not easy to come by. One would have to break out a calculator in order to see a glimmer of actual figures. Still, even with a calculator actual foreclosure filings are almost impossible to tell because numerous types of filings appear including Real Estate Owned properties, or REOs. REOs shouldn’t be counted again as they have already been counted in the notice of default category, in months prior.

As foreclosure concerns increase, it looks like readers and journalists are finally beginning to question the accuracy of foreclosure reporting companies. While questioning the companies and researching figures is much more difficult than simply accepting the given figure, it is happening sporadically.

Take an article published in the Park Record on February 27, 2009. The article titled, “Foreclosures may increase in 2009″ analyzes a few different foreclosure listing companies. Here is an excerpt of the article.

“Realtytrac.com, a popular foreclosure listing site, says there are 37 such properties in Summit County. Two other websites, Foreclosure.com and Foreclosurefreesearch.com list about 20 such properties in the county.”

Considering the data collection methods of RealtyTrac, the higher figure (almost double) is of no surprise. The article continues by stating, “the smaller number is closer to what is actually posted on an official board in the Summit County Recorder’s Office.”