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Foreclosure Pipeline "Bloated". New Delinquencies Down

by devteam May 6th, 2011 | Share

Every foreclosure related report that issued during the lastrnfew months has increased certainty that the millions of delinquencies andrnforeclosures the country plaguing the country for the last three years arernfinally beginning to clear the system.</p

The Mortgage Monitor Report released by Lender ProcessingrnServices, Inc. (LPS) on Tuesday provides further evidence thatrndelinquencies are down and the pace of foreclosures is picking up after monthsrnof moratoria, retrenching and procedure reviews.  At the same time, at the end of March, therninventory of foreclosures (loans referred to an attorney and awaiting auctionrnor repossession) hit an all-time high and foreclosure starts soared byrnone-third.  The foreclosure inventory is 2.2rnmillion loans and the foreclosure rate stands at 4.2 percent.</p

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Delinquencies decreased from February to March by 11 percent,rnreaching the lowest levels in three years and were down nearly 20 percent fromrnthe same figure one year earlier.  Evenrnbetter news is the drop in early stage delinquencies with numbers of 30-day andrn60-day delinquencies approaching pre-crisis levels.   Part of this is seasonal; the first quarterrnof virtually every year shows a drop in new delinquencies, and historicallyrnMarch is consistently the month with the largest declines.  Still, from February 1 to March 31 there was arndrop of close to 463,000 delinquent loans in the 30 + and 60+ category for arntotal of 2,121,352 early delinquencies.   The overall delinquency rate now stands atrn7.78 percent.</p

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The rise in foreclosure inventory and decrease inrndelinquencies over the last six months have affected all loan types.  The most dramatic drop in delinquencies hasrnbeen in Agency Prime Mortgages. rnDelinquencies have declined by about 20 percent to a current rate ofrn4%.  FHA/VA loan delinquencies droppedrnabout 16 percent to 9.6 percent and subprime loan delinquencies while stillrnstanding at a 27.1 declined 15 percent.Foreclosures on borrowers with an option ARM loans have increased by 20rnpercent in the last six months to a 19 percent rate.  Foreclosures of non-Agency Conforming Primernloans were up about 17 percent to 4.4 percent and Subprime loans increased 16rnpercent to 15.2 percent.</p

A foreclosure was initiated against about 250,000 loans inrnMarch an increase of about 25 percent month-over-month.  The biggest jump in foreclosure starts wasrnamong loans that were six months or more in arrears.  Both statistics indicate that the delays inrnforeclosures caused by problems with loan documentation have ended and loansrnwill begin to move more rapidly toward resolution.  Foreclosure sales also bumped up to 95,000rnduring the month but remain far below the levels before the robo-signingrnscandal jammed up the system.  </p

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LPS refers to the foreclosure pipeline asrn”bloated.”  Foreclosures salesrnare outnumbered by foreclosure starts three to one and by loans in foreclosure 30rnto one. Loans that are 90+ delinquent combined with the foreclosure inventoryrnoutnumber sales 45 to one.</p

Despite the recent pick-up in foreclosure starts and sales,rnloans still remain in a delinquent status for an extraordinary period ofrntime.  In eight states and the Districtrnof Columbia the process averages over a year, taking an average of 444 days inrnNew York, a judicial foreclosure state and 419 days in DC, a non-judicialrnregion.  South Dakota, with a judicialrnprocess, averages 219 days to foreclosure, the fastest in the country.</p

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The states with the highest percentage of non-current loansrnare Florida, Nevada, Mississippi, New Jersey, and Georgia.</p

The post-crisis vintage of new mortgages continues to holdrnup well.  Loans originated in 2005 werernrunning about a 5 percent delinquency rate at the point where 24 paymentsrnshould have been received.  At that samernpoint the 2009 vintage is at about 3 percent. rnThe most recent loans, originated in 2010, looks even better; at 14rnmonths the delinquency rate is about 1.5 percent compared to 2 percent for thern2009 loans and well over 3 percent for those originated in 2005.<br /<br /The report also found that mortgage origination activity continues to be dampened,rnprimarily due to an ongoing reduction in refinance activity. As interest ratesrnrise and credit requirements remain more exacting, the majority of homeownersrneligible to refinance may have already done so.</p

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Housing Scorecard: Delinquencies Down. Foreclosures Delayed</p

Foreclosure Filings Drop. Prevention Policies Distorting Supply and Demand </p

LPS Data Shows Long Delays in Foreclosure Process</p

CoreLogic Estimates Shadow Inventory at 1.8 Million Homes</p

Foreclosure Filings Fall. Robogate Fallout Skews Report

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About the Author

devteam

Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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