Seventy-Two Percent of Loans in Foreclosure are Underwater

October 4, 2011 (Shirley Allen)

Monthly foreclosure starts increased by 20 percent from July to August with first-time foreclosure starts reaching their highest levels in 2011 according to the Mortgage Monitor Report for August by Lender Processing Services (LPS).

There were 247,957 foreclosure starts posted in August, up from 207,223 in July. Despite the large increase in foreclosure starts during the month, total starts were still 12.2 percent below the 282,528 foreclosure starts in August of last year.

LPS estimates that 23 percent of the loans that it services in which the borrower is current on their payments have negative equity and that 27 percent of all the loans in their portofolio have negative equity.

However, after a borrower misses a payment, the proportion of loans that have negative equity almost doubles and increases each step of the way through the delinquency and foreclosure process.

Once a borrower misses their first payment and a loan becomes 30+ days delinquent, the percentage of loans at that stage with negative equity increases to 45 percent. At 60+ days delinquent, the percentage increases to 52 percent and at 90+ days delinquent, the percentage of loans that have negative equity increases to 57 percent.

Once a loan becomes 120 days or more delinquent, it joins a pool of loans in which 69 percent of the loans have negative equity and by the time it finally reaches the foreclosure process, a whopping 72 percent of the loans at that stage have negative equity.

Foreclosure timelines continue to increase as the average delinquency, loans that are 90+ days delinquent but not yet in foreclosure, is at a record 400 days and the average number of days that a loan in foreclosure has been delinquent is now 611, also a new record.

Average delinquencies in judicial states are about six months longer at the time of the foreclosure sale than non-judicial states.

Earlier highlights from LPS’s “First Look” report include:

Total U.S. loan delinquency rate (loans 30 or more days past due, but not in foreclosure): 8.13% compared to 8.34% in July 2011

Month-over-month change in delinquency rate: -2.5% compared to 2.4% in July 2011

Year-over-year change in delinquency rate: 4.11% compared to -10.4% in July 2011

Month-over-month change in foreclosure presale inventory rate: 0.1% compared to -0.4% in July 2011

Year-over-year change in foreclosure presale inventory rate: 8.2% compared to 9.7% in July 2011

Number of properties that are 30 or more days past due, but not in foreclosure: (A) 4,249,000 compared to 4,382,000 in July 2011

Number of properties that are 90 or more days delinquent, but not in foreclosure: 1,866,000 compared to 1,899,000 in July 2011

Number of properties in foreclosure pre-sale inventory: (B) 2,148,000 compared to 2,156,000 in July 2011

Number of properties that are 30 or more days delinquent or in foreclosure: (A+B) 6,397,000 compared to 6,538,000 in July 2011

States with highest percentage of non-current* loans: FL, MS, NV, NJ, IL (FL, NV, MS, NJ, IL in July 2011)

States with the lowest percentage of non-current* loans: MT, WY, AK, SD, ND (MT, WY, AK, SD, ND in July 2011)

*Non-current totals combine foreclosures and delinquencies as a percent of active loans in that state.

Notes:
(1) Totals are extrapolated based on LPS Applied Analytics’ loan-level database of mortgage assets.
(2) All whole numbers are rounded to the nearest thousand.

Tags: LPS, mortgage delinquency rate, foreclosure inventory, non-current loans

Source:
LPS