By Steve Cook
Of the approximately 4 million mortgages that are either 90 or more days delinquent or in foreclosure, the numbers that are delinquent 90 days or more has shrunk to levels not seen since 2008.
August data from Lender Processing Services also showed that a smaller percentage of “first-time” delinquencies—new problem loans that had never been delinquent before—loans are seriously delinquent, compared to peak in delinquencies two years ago. Of the loans that were current six months prior, 1.4 percent had become seriously delinquent, a rate of less than half of the peak of 2.9 percent in 2009. At the same time, “first time” delinquencies accounted for approximately a quarter of total new delinquencies—further signs of an improving trend for new problem loans.
August results showed an all-time high in the number of loans shifting from foreclosure back into delinquent status, suggesting that process reviews and potential loss mitigation activity are continuing. As a result, foreclosure timelines continue to increase, with the average loan in foreclosure having been delinquent for a record 611 days. Average delinquencies in non-judicial states continue to be about six months shorter at time of foreclosure sale compared to judicial states, where backlogs continue to be extremely high.
However, of the nearly 46 million loans that were current as of the end of August, 23 percent were still at risk as a result of negative equity—a leading indicator of a borrower’s propensity to default.
While declining delinquencies suggest foreclosure inventories will fall in the long term, the short term picture is not so bright. Foreclosure starts were up in August by nearly 20 percent compared to July 2011, with first-time foreclosure starts reaching 2011 highs. Overall, foreclosure starts remained down more than 12 percent from this time last year.
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