Thursday, May 26, 2011

LPS: Mortgage Delinquency Rates increased slightly in April, Foreclosure pipeline "Bloated"

by Bill McBride on 5/26/2011 12:40:00 PM

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

•Delinquencies increased slightly in April. Delinquencies are down almost 10% on the year and over 25% from the peak in January 2010.
•The inventory of late stage delinquencies continues to age, with 40% of borrowers who are in 90+ delinquency status having not made a payment in over a year.
•Improvement continues in the early stages of the pipeline as new seriously delinquent loan rates have dropped to three year lows.
•Both foreclosure starts and sales declined in April -foreclosure sales are still well below the pre-moratoria levels of late 2010.
•The foreclosure pipeline remains bloated with overhang at every level and limited foreclosure sale activity
According to LPS, 7.97% of mortgages were delinquent in April, up from 7.78% in March, but down from 8.80% in February and down from 9.52% in April 2010. Some of this increase is the normal seasonal pattern.

LPS reports that 4.14% of mortgages were in the foreclosure process, down from the record 4.21% in March. This gives a total of 12.11% delinquent or in foreclosure. It breaks down as:

• 2.24 million loans less than 90 days delinquent.
• 1.96 million loans 90+ days delinquent.
• 2.18 million loans in foreclosure process.

For a total of 6.39 million loans delinquent or in foreclosure in April.

Delinquency Rate Click on graph for larger image in graph gallery.

This graph provided by LPS Applied Analytics shows the aging for the 90+ days delinquent bucket.

What is surprising is the large percentage in the 90+ days delinquent bucket that are more than 12 months delinquent and haven't moved to the "in foreclosure process" bucket. About 40% of loans in the 90+ days bucket - or about 800,000 loans - have been delinquent over a year.

The second graph - from the March report - shows the aging of loans in the foreclosure process.

Delinquency Rate"31% of loans in foreclosure have not made a payment in over 2 years." So about one third of the 2.2 million loans in the foreclosure process haven't made a payment in over 2 years.

These two graphs show the "bloated" backlog of seriously delinquent loans (90+ days and in foreclosure).

The good news is the improvement in the early stages, however there is still an enormous number of seriously delinquent loans.

Note: Earlier today, RealtyTrac put out their monthly foreclosure report. The report included the statement: "[T]he current inventory of 1.9 million properties already on the banks’ books, or in foreclosure." I think that number is incorrect. RealtyTrac estimates about 872,000 REOs (Real Estate Owned) and another 1 million in foreclosure.

However, as LPS reported (the MBA has reported similar numbers), there about 2.2 million loans in the foreclosure process, and economist Tom Lawler has estimated the number of REO on lenders' books at about 600,000. Plus there are an additional 2 million loans 90+ days delinquent (about 800,000 are over 1 year delinquent). Some of these loans will cure because of modifications or other reasons. And some of these homes will be sold as short sales. But it appears the number of homes in the pipeline is well over 1.9 million. Just trying to get the numbers correct!

Final note: Recently I've seen seen some very high estimates of the percentage of distressed U.S. homes. So here are some numbers to use:
• There are just under 75 million owner occupied homes in the U.S.
• Just over 50 million homes have a mortgage (LPS estimated 54 million in 2010). The remaining are owned free and clear.
• There are 6.4 million loans delinquent, with about 4.1 million seriously delinquent (90+ days or in foreclosure).

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