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Getting a fix on foreclosure data

REAL ESTATE

Some people are losing their homes in this queasy market, that's for sure. But how many? No one agrees.

May 28, 2007|David Streitfeld | Times Staff Writer

RealtyTrac has tried to straddle the line between selling data to investors looking for a profit and presenting broad trends to the media looking for a story.

It started in 1996 in Santa Barbara as an electronic bulletin board for real estate agents, notifying them of REOs that might be suitable for their clients. To promote its listings, the company began issuing press releases about foreclosure trends.

"Every newspaper has a real estate section, and every newspaper reporter has days where he has holes to fill," said RealtyTrac Vice President of Marketing Rick Sharga. "Our objective was to position ourselves as the de facto resource for foreclosures. That would give us credibility."

RealtyTrac is privately held, and Sharga declined to say how many subscribers pay $49.95 a month for its distressed-property listings. But he said the company had 200 employees, many added in the last six months.

"We're being used by the FBI for fraud detection, the Federal Deposit Insurance Corp. for hot-spot analysis and predictive modeling, and the Federal Reserve for a nine-state analysis of foreclosure trends in the Midwest," Sharga said.

The congressional Joint Economic Committee asked the firm for data to bolster a report last month titled "Sheltering Neighborhoods From the Subprime Foreclosure Storm."

"We went to a variety of folks, and they had the best numbers, the most useful," said committee spokesman Israel Klein.

The report painted a grim picture, saying "communities are struggling to stem the tide of foreclosures that impose significant costs on families, neighborhoods and cities."

In Atlanta, 1 out of 23 homes suffered foreclosure in 2006, according to a chart in the report. In Dallas, it was 1 out of 26; in the Inland Empire, 1 out of 39.

With home prices heading down in 2007 and adjustable-rate mortgages resetting to rates that many borrowers can't afford to pay, the committee concluded that government intervention was urgently needed.

The Mortgage Bankers Assn. points out that RealtyTrac has an incentive to overstate the foreclosure crisis.

"Their business model is to market foreclosed properties," said the association's chief economist, Doug Duncan.

Sharga said the mortgage bankers' group had its own agenda.

"Given their clientele, it would not surprise me if their reports represented the most conservative possible interpretation of foreclosure activity," he said.

In Colorado, the state Division of Housing grew so frustrated with RealtyTrac's numbers that it took the unprecedented step of polling its counties itself.

It found 9,254 filings in the first quarter, 44% fewer than found by RealtyTrac. Though the Division of Housing number is still relatively high, the report noted that as few as half of filings proceed to an auction in which the owner loses title.

Sharga said that on homes with multiple loans, a single house could account for as many as seven foreclosures. "The nice way to put it is that we count different things and our methodologies are different," he said.

The less nice way to put it is that RealtyTrac is "ridiculous and irresponsible," which is what Colorado Division of Housing Director Kathi Williams said to the Rocky Mountain News this month.

Sharga blamed the media for misinterpreting RealtyTrac's numbers, but he did acknowledge "some tension" involving the data on the percentage of households in foreclosure that was used by the Joint Economic Committee. He said the firm was working on fine-tuning its figures.

Not fast enough for Williams, who noted last week that the company's April report showed a household foreclosure rate about three times the state's rate.

"We're not even in the same ballpark," she said.

david.streitfeld@latimes.com

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