Friday, January 06, 2012

LPS on Mortgages: "Trend toward fewer loans becoming delinquent has halted"

by Bill McBride on 1/06/2012 02:59:00 PM

From LPS Applied Analytics: LPS' Mortgage Monitor Shows Halt in Delinquency Drop; Foreclosure Starts Down in November

The November Mortgage Monitor report released by Lender Processing Services, Inc. shows that while mortgage delinquencies at the end of November 2011 were nearly 25 percent less than the January 2010 peak, the trend toward fewer loans becoming delinquent, which dominated 2010 and the first quarter of 2011, appears to have halted. At the same time, new problem loans – those loans seriously delinquent as of the end of November that were current six months prior – have not improved significantly in the last year. This degree of stagnation indicates that while the situation is not getting markedly worse, it is not improving either, and inventories of troubled loans remain significantly higher than pre-crisis levels across the board.
According to LPS, 8.15% of mortgages were delinquent in November, up from 7.93% in October, and down from 9.02% in November 2010.

LPS reports that 4.16% of mortgages were in the foreclosure process, down from the record 4.29% in October, and up from 4.08% in November 2010. This gives a total of 12.31% delinquent or in foreclosure. It breaks down as:

• 2.33 million loans less than 90 days delinquent.
• 1.81 million loans 90+ days delinquent.
• 2.21 million loans in foreclosure process.

For a total of 6.26 million loans delinquent or in foreclosure in November.

Delinquency Rate Click on graph for larger image.

This graph shows the total delinquent and in-foreclosure rates since 1995.

The total delinquent rate has fallen to 8.15% from the peak in January 2010 of 10.97%, but the decline has "halted". A normal rate is probably in the 4% to 5% range, so there is a long ways to go.

The in-foreclosure rate was at 4.16%, down from the record high last month of 4.29%. There are still a large number of loans in this category (about 2.21 million). LPS reported that foreclosure starts were down nearly 30% in November, probably due to process issues.

Foreclosure Inventory This graph provided by LPS Applied Analytics shows foreclosure inventories by process.

As LPS noted last month "Judicial vs. non-judicial foreclosure processes remain a significant factor in the reduction of foreclosure pipelines from state to state, with non-judicial foreclosure inventory percentages less than half that of judicial states. This is largely a result of the fact that foreclosure sale rates in non-judicial states have been proceeding at four to five times that of judicial. Non-judicial foreclosure states made up the entirety of the top 10 states with the largest year-over-year decline in non-current loans percentages."

Pipeline RatioThe third graph shows the pipeline ratio (90+ delinquencies and foreclosures, divided by foreclosure sales).

"Pipeline ratios in several judicial states remain extreme." This is especially true for New York and New Jersey - and means that the level of foreclosure sales will probably increase sharply in those states soon. Most of the non-judicial states are in much better shape.

As LPS noted "while the situation is not getting markedly worse, it is not improving either".
All current mortgage delinquency graphs