New Delinquencies at Six-Year Low -LPS

In yet another indication that the housing market is stabilizing, Lender Processing Services (LPS) said today that new problem loan rates have fallen below 1 percent for the first time in six years.  Loans that were seriously delinquent in March but were current six months earlier now represent 0.84 percent of mortgages, a rate LPS said is approaching pre-crisis levels.  In the 2000-2004 period the rate was 0.55 percent.

LPS Senior Vice President Herb Blecher said that there has always been a clear correlation between high levels of negative equity and new problem loan rates.   "Looking at the March data, we see that borrowers with equity are actually outperforming the national average -- at 0.6 percent, this group is quite close to pre-crisis norms. The further underwater a borrower gets, the higher those problem rates rise. Borrowers with loan-to-value (LTV) ratios of just 100-110 percent are actually defaulting at more than twice the national average. For those 50 percent or more underwater, we see new problem rates of 4 percent.

"Still, the overall equity trend has been a very positive one," Blecher continued. "LPS' latest data shows that the share of loans with LTVs greater than 100 percent has fallen 41 percent from a year ago. In total, there were approximately 9 million such loans, or about 18 percent of active mortgages. Some states, including the so-called 'sand states' (Arizona, Florida, Nevada and California), are still well above the national level, at an average 28 percent, but they, too, have seen improvement over the last year, with negative equity dropping over 40 percent across those four states since January 2012."

As reported when LPS first released early numbers from its Mortgage Monitor report last month, the U.S. delinquency rate in March was 6.59 percent, down 3.13 percent from February and the national foreclosure inventory was 3.37 percent, 0.41 percent lower than in the previous month.  The foreclosure inventory reflects mortgages that are in some stage of the foreclosure process.   Foreclosure starts were down 8.2 percent month over month, while foreclosure sales rose 10.1 percent.

LPS said that the recent passage of the state's Homeowner Bill of Rights appears to have considerably slowed the foreclosure sale process in California.  In Q1 2013, foreclosure sales outside of California increased 13 percent from Q4 2012, whereas in California they fell 35 percent during that same period.   The law does not seem to have had a similar effect on the state's foreclosure starts which, while down significantly from 2012 levels, are in line with the rest of the nation's decline in that area following the attorneys general mortgage settlement and FHA modification initiatives.