Dec 06, 2010
Lending Processing Services (LPS) issues a monthly Mortgage Monitor which looks at several aspects of mortgage performance. We like to study this report to see what is currently taking place with delinquencies and foreclosures. The November report (which covers through October) had some very interesting information.
Delinquency Rates
All delinquency statuses are calculated using the MBA methodology based on the payment due date provided by the servicer. Loans in foreclosure are reported separately and are not included in the MBA days delinquent.
Total delinquencies remained relatively stable for the fifth consecutive month and are down 8.4% from the same month last year. Basically, the delinquency challenge is not getting any worse and is leveling off at numbers below where they were last year.
However, these numbers are still 2.7 times historical averages. The number of loans becoming 90 days delinquent still far outnumbers foreclosure starts.
Foreclosure Inventory
The servicer has referred the loan to an attorney for foreclosure. Loans remain in foreclosure inventory from referral to sale.
Inventory is continuing to rise rather dramatically – up 7.1% since June – and up 5.2% from the same time last year. This is not good news as this inventory will be placed on the market in coming months at discounted prices. That will put downward pressure on all housing values. Inventories are 7.4 times historical averages and continuing to rise.
The two greatest percentage increases in foreclosure inventories since 2008 come from jumbo prime and prime mortgages.
The movement of foreclosed inventory to REO (foreclosed properties on the market) dropped dramatically in October. The monthly decrease could be explained by the moratorium put into effect by some banks because of the robo-signing challenge.
Foreclosure Starts
Any active loan that was not in foreclosure in the prior month that moves into foreclosure inventory in the current month.
There were 263, 251 foreclosures started last month. This is down 4.4% from the previous month but up 2.9% from last year’s numbers. The monthly decrease could be explained by the moratorium put into effect by some banks because of the robo-signing challenge.
Loans NOT Yet in Foreclosure
The percentage of loans not yet in foreclosure that has not had a payment made in over six months.
- § 27.2% of loans 6 months behind are still NOT in foreclosure
- § 21.1% of loans 12 months behind are still NOT in foreclosure
- § 19.2% of loans 18 months behind are still NOT in foreclosure
- § 18.3% of loans 24 months behind are still NOT in foreclosure
Foreclosure Sales
Any loan that was in foreclosure in the prior month that moves into post-sale status or is flagged as a foreclosure liquidation.
Foreclosure sales plummeted 35% last month. The monthly fall-off could be explained by the moratorium put into effect by some banks because of the robo-signing challenge.
Bottom Line
The delinquency situation seems to be improving. However, it will take some time for the foreclosures to clear. The housing market won’t fully recover until they do.
*** Courtesty of KCM