July 26, 2011 (Jeff Alan)
Mortgage loans that were originated in 2005 to 2007 account for nearly two-thirds of past due balances according to Equifax. And although 30+ day delinquencies have been on the decline, roll rates for 60+ and 90+ day delinquencies continue to rise.
Lender loan write-offs for first mortgages, home equity installment loans, and home equity revolving accounts reached $304.6 billion in 2010. Equifax’s analysis suggests that number will continue to climb in the future with no signs of when it will peak.
By comparison, the combined amount of loan write-offs in 2006 and 2007 totaled only $126.7 billion.
Equifax estimates that as of May 2011, there are approximately $319.7 billion in first mortgages in the initial stages of the foreclosure process that were originated in 2006 and 2007. Not surprising considering the amount of sub-prime lending activity that occurred at that time.
Eventually, many of these homes will enter into the shadow inventory and depending on the state, will begin entering the housing market as real estate owned (REO) properties in one to three years.
At the end of May 2011, REO properties were three percent of all first mortgages totaling $21.8 billion.
Equifax says REO properties represent a major roadblock to economic recovery as REO rates remain high while lenders struggle to divest themselves of properties through auctions and short sales.
Foreclosure completion rates are at 1.45 percent, almost at the same level as bankruptcies which are currently at a rate of 1.6 percent. Equifax says that the similar rates suggest that the majority of REO properties are a result of bankruptcy proceedings.
“Shadow inventory and real estate owned properties are still playing a dominant role in today’s mortgage market and slowing the pace of economic recovery. While we are seeing stabilization across multiple sectors of lending, there remains a significant volume of delinquent first mortgage loans, which has slowed the foreclosure process. Until these foreclosures are processed, the mortgage market will continue to impact economic growth,” said Craig Crabtree, senior vice president and general manager, Equifax Mortgage Services
Tags: Equifax, pre-housing bust, loan delinquencies, first mortgages, home quity installment loans, home equity revolving accounts, loan write-offs, REO, mortgage market