With third quarter reports still trickling in, foreclosure research agencies continue to take varying approaches to how their foreclosure numbers are reported. One method is no less confusing that the next, especially when compounded with reporter bias.

Take the latest foreclosure statistics article published on December 5, 2008, from the website, CNNMoney.com. The article is titled, “Foreclosures soar 76% to record 1.35 million,” and is written by Tami Luhby. The article offers a totally different approach to presenting foreclosure statistics by providing the ‘default rate’. The ‘default rate’ is not to be confused with the rate at which foreclosures increase or decrease from one period to another, but rather the rate at which all borrowers have foreclosed or defaulted on their loans. This method is less popular throughout the media and may lead to confusion for readers (even experts!).

In addition to a confusing use of the rate of default, the article also confuses the process of foreclosure with actual foreclosed homes. For example, the article mentions that “1.35 million homes were in foreclosure in the third quarter.” The article continues by saying those figures drove “the foreclosure rate up to 2.97%.”

The problems lies in the fact that the article makes it sound as if there were 1.35 million pre-foreclosures “driving up the foreclosure rate,” when in fact these may be actual foreclosures- or is it pre-foreclosures? Who knows, readers may have already given up on the article by the first paragraph.

The only way a reader would know that the actual rate of loan defaults (not foreclosures) is if they continue reading to the next paragraph, which states that “the number of homeowners falling behind on their mortgages rose to a record 6.99%.” Again, this leads to more confusing figures. Recent articles show that foreclosures have decreased by 7% in the third quarter while this article states that pre-foreclosure rates have rose to 6.99%.

The article offers one last piece of confusing evidence. It states that the figures in the article are provided by the Mortgage Banker’s Association and the figures represent about 85% of all mortgages. Now, this is a problem on its own. Why even bother with a default rate of any kind if it is just a sample of data?