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Friday, April 29, 2011

LPS: Mortgage Delinquency Rates declined in March, Foreclosure pipeline "Bloated"

by Calculated Risk on 4/29/2011 04:55:00 PM

LPS Applied Analytics released their March Mortgage Performance data. From LPS:

• Delinquencies ended the quarter 12% lower than the end of last year, over 500,000 loans have left the delinquent pool over the last three months.
• New problem loan rates are at a three year low as fewer loans are going bad. At the same time, seasonal trends have helped support a large increase in monthly cure rates.
• March typically sees large seasonal declines in new delinquency rates, though this year was the second largest on record.
• Modification activity also contributes to the improved landscape with almost a quarter of 90+ delinquencies from last year now current on their payments.
• The foreclosure pipeline is still bloated with overhang at every level:
– There are almost twice as many loans deteriorating greater than 90+ days delinquent vs. starting foreclosure.
– There are almost three times the number foreclosure starts vs. foreclosure sales.
– 90+ and foreclosure inventory levels are almost 45 times monthly foreclosure sales.
• Origination activity has dropped off in early 2011 and due to much stricter underwriting, recent vintages have been performing exceptionally well.
Delinquency Rate Click on graph for larger image in graph gallery.

This graph provided by LPS Applied Analytics shows the percent delinquent and percent in foreclosure.

The percent in the foreclosure process has been trending up because of the foreclosure issues.

According to LPS, 7.78% of mortgages are delinquent (down from 8.80% in February), and a record 4.21% are in the foreclosure process (up from 4.15% in February) for a total of 11.93%. It breaks down as:

• 2.12 million loans less than 90 days delinquent.
• 1.99 million loans 90+ days delinquent.
• 2.22 million loans in foreclosure process.

For a total of 6.33 million loans delinquent or in foreclosure.

Delinquency RateThe second graph shows the break down of foreclosures by days delinquent.

"31% of loans in foreclosure have not made a payment in over 2 years." So about one third of the 2.22 million loans in the foreclosure process haven't made a payment in over 2 years.

The decline in the delinquency rate is partially seasonal, but the sharp decline is a positive. A key problem is all those homes in the foreclosure process. As LPS notes: "Delinquencies have dropped to about 1.8 times the 1995-2005 average, foreclosure inventories are 8 times historical “norms”." There were only 94,780 foreclosure sales in March and 270,681 foreclosure starts - so the foreclosure inventory just keeps growing.