Stricter Lending Guidelines Leads to Higher Quality Mortgages

February 14, 2012 (Shirley Allen)

Although tougher credit criteria for obtaining a mortgage has definitely hampered the recovery of the housing market, it has also resulted in some of the best quality mortgage originations on record according to the Mortgage Monitor Report released by Lender Processing Services (LPS).

Ninety-day default rates from vintage mortgage originations in 2010 and 2011 are below all previous years dating back to 2005, likely the result of stricter lending standards by mortgage servicers.

In 2011, 44 percent of vintage originations had a credit score equal to or greater than 720 and loan-to-value ratio of less than 80 percent. In 2005, 36 percent of the originations met that criteria and in 2008 only 34 percent of the vintage originations met that criteria.

The result has been 90-day default rates that are over half of what they were in 2005 after just 10 months and over four times less than what they were in 2008.

Delinquencies held steady in December as the total number of loans that were 30 days or more past due, but not yet in foreclosure, remained unchanged from the previous month at 8.15 percent. The delinquency rate was still 7.7 percent lower than what it was in December 2010.

The number of properties in the foreclosure inventory declined 2.7 percent in December to a total of 2.066 million, down from 2.116 million properties in November, a decline of 50,000 properties.

The number of properties in the shadow inventory also declined, falling from 1.809 million properties in November to 1.792 million properties in December, a decrease of 15,000 properties.

The total number of properties that were either delinquent or in foreclosure declined from 6.260 million in November to 6.167 million in December, a decline of 1.5 percent.

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): 8.15% compared to 8.15% in November 2011

Month-over-month change in delinquency rate: 0.0% compared to 2.7% in November 2011

Year-over-year change in delinquency rate: -7.7% compared to -9.6% in November 2011

Total U.S foreclosure pre-sale inventory rate: 4.11% compared to 4.16% in November 2011

Month-over-month change in foreclosure presale inventory rate: -31.3% compared to -3.0% in November 2011

Year-over-year change in foreclosure presale inventory rate: -1.0% compared to 2.0% in November 2011

Number of properties that are 30 or more days past due, but not in foreclosure: (A) 4,101,000 compared to 4,144,000 in November 2011

Number of properties that are 90 or more days delinquent, but not in foreclosure: 1,792,000 compared to 1,809,000 in November 2011

Number of properties in foreclosure pre-sale inventory: (B) 2,066,000 compared to 2,116,000 in November 2011

Number of properties that are 30 or more days delinquent or in foreclosure: (A+B) 6,167,000 compared to 6,260,000 in November 2011

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

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