LPS: Delinquent mortgages rise in November

I think this is the trend as more people walk away from their mortgage.

The number of delinquent mortgages in November rose to 8.15% from 7.93% the prior month, according to a first look report from Lender Processing Services (LPS: 14.47 +1.19%).

That delinquency rate as a percentage of the LPS database of 40 million mortgages declined nearly 10% from a year earlier. About 4.14 million homes were 30 or more days past due in November, with about 1.81 million properties more than 90 days past due.

LPS considers a mortgage delinquent when it's at least 30 days in arrears but not in foreclosure. The company recorded 6.26 million homes either delinquent or in foreclosure last month.

Foreclosure presale inventory dropped 3% from October, but increased 2% from November 2010.

States with the highest percentage of noncurrent loans include Florida, Mississippi, Nevada, New Jersey and Illinois, according to the LPS report. Montana, South Dakota, Wyoming, Alaska and North Dakota had the lowest noncurrent loan rates

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New Foreclosure Wave is Coming: Olick

There is an anticipation that more homeowners that can pay their mortgage will simply default, because they have negative equity in their house.  This report sort of confirming this prediction.

"November’s numbers suggest a new set of incoming foreclosure waves, many of which may roll into the market as REOs [bank repossessions] or short sales sometime early next year,” said James Saccacio, co-founder of RealtyTrac. “Overall foreclosure activity is down 14 percent from a year ago, the smallest annual decrease over the past 12 months, and some bellwether states such as California, Arizona and Massachusetts actually posted year-over-year increases in foreclosure activity in November.

Also, there some states that are having major delays.

Other states, like New York and New Jersey, are still seeing huge delays in the foreclosure process--986 and 984 days respectively, says RealtyTrac, but they too are starting to ramp up, as various moratoria have been lifted and judges have made rulings that will kick-start the process. That will mean more distressed properties surging into an already troubled housing market. Foreclosure starts outnumber sales by three to one, and 45 percent of foreclosure starts in October were repeat foreclosures, according to Lender Processing Services.

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Mortgage Banks Association (MBA) shortsold office space, but tells homeowners to pay mortgages

From the New Yorker

Sometimes the hypocrisy is staggering: last winter, the Mortgage Bankers Association—the very body whose president attacked defaulters for betraying their families and their communities—got its creditors to let it do a short sale of its headquarters, dumping it for thirty-four million dollars less than the value of the building’s mortgage.

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Freddie Mac single-family delinquency rate edges up in October

Government-sponsored enterprise Freddie Mac reported Wednesday that its single-family seriously delinquent rate edged up in October, hitting 3.54%, compared to 3.51% in September.

At the same time, the multifamily delinquency rate edged down to 0.31% in October from 0.33% in September.

The company, which is involved in an ongoing shift from a GSE-driven market to a more privatized mortgage finance system, saw its total mortgage portfolio fall at an annualized rate of 5.2% last month.

The single-family, refinance, loan purchase and guarantee volume hit $24.1 billion in October, representing 72% of the GSE's total mortgage portfolio purchases and issuances.

In addition, the mortgage-related securities and other guarantees from the GSE fell at an annualized rate of 6.6% during the month of October.

In October, Freddie Mac modified 6,571 loans, up from 6,465 loans in September, bringing the 10-month total to 96,697 loan mods.

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Jumbo mortgage holders pose highest risk of strategic default

I'm having trouble reprinting another article.  But is related to the FHA audit that also is coming out.  

In a study released Oct. 31, ratings firm Moody's said that based on its analysis of mortgage-backed bond portfolios, homeowners with jumbo mortgages now constitute "greater strategic default risk" than any other type of borrowers, including subprime.

That's because an exceptionally high number of jumbo loan owners — many located in high-cost markets hit by real estate deflation over the last several years — are stuck with persistent negative equity. More than half of the jumbos analyzed by Moody's in which owners are still making payments are underwater, or have home market values lower than their outstanding loan balances.

Jumbo loans are those that exceed the conventional limits of Fannie Mae and Freddie Mac. Nationally, that ceiling is $417,000, but in high-cost areas between 2008 and Oct. 1 of this year, conventional limits ranged as high as $729,750. The maximum in those high-cost areas is now $625,500.

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California default notices increase 17% in October

“The October foreclosure numbers continue to show strong signs that foreclosure activity is coming out of the rain delay we’ve been in for the past year as lenders corrected foreclosure paperwork and processing problems,” said James Saccacio, chief executive officer of RealtyTrac. “However, recent state court rulings and new state laws keep changing the rules of the foreclosure game on the fly, creating more uncertainty in the housing market and threatening to prolong the road to a robust real estate recovery.”

And for California.

California default notices increased 17 percent from the previous month to a 13-month high, helping the state post the nation’s second highest foreclosure rate: one in every 243 housing units with a foreclosure filing in October. A total of 29,240 default notices were reported in California in October, a 1 percent increase from October 2010 — the first year-over-year increase in defaults in California since November 2009.

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Mortgage delinquency rate edges up for first time in two years

And just coming off the negative equity news this morning.

The national delinquency rate for borrowers who are 60 days or more past due on their mortgages rose for the first time in two years during the recent third quarter, TransUnion said Tuesday.

The delinquency rate for seriously past due loans edged up to 5.88% in 3Q, TransUnion reported.

"Until this quarter, we had seen six straight quarters where progressively more people were able to make their mortgage payments on time," said Tim Martin, group vice president of U.S. Housing in TransUnion's financial services business unit. "We expected that trend to continue given recent, relatively more conservative lending policies and the apparent stabilization of both home values and unemployment."

Martin said the six quarters of relative stability were disrupted by unanticipated shocks to the American economy in the third quarter. Those shocks included the European debt crisis, high unemployment, falling home values and low consumer confidence.

"All of this affects a borrower's net worth and desire, or ability, to continue making house payments — especially if they are facing negative equity in their homes due to price depreciation," said Martin.

All but 10 U.S. states and the District of Columbia experienced a jump in mortgage delinquency rates when comparing the third quarter to the second, TransUnion said

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Rising foreclosure rates to impact home prices, Fitch says

Rising foreclosure start rates will add to the distressed property inventory and drive home prices further down, according to a report from Fitch Ratings, reflecting the impact of last year's robo-signing scandal.

More than 10% of severely delinquent loans in private-label residential mortgage-backed securities are now moving into foreclosure each month, the ratings agency said. That's nearly double the rate from a year ago when the moratoria instituted by lenders and servicers in the wake of the robo-signing debacle were in place. It's also edging closer to the 14% rate seen between 2000 and 2010.

And....

"Rising foreclosure start rates are likely a sign that servicers are playing catch-up on actions that have been delayed over the past year," Fitch Managing Director Diane Pendley said in the report. "Mortgage servicers now generally feel they have implemented the corrective actions that they determined were needed."

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Strategic default risk growing for negative equity jumbo mortgages

More people are just walking away.

Loans considered always current or those with LTV ratios below 100% are shrinking in the jumbo space. In September 2011, these loans made up less than 35% of the jumbo universe, down from more than 50% in November 2009.

"Indeed, default rates among always- current borrowers have not come down as much as in the subprime sector, meaning that the pool of current borrowers has not strengthened as much over time," Moody's said.

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S&P/Experian: Default Rates Rise for First and Second Mortgages

Either these loans were given a modification or the lender finally foreclosed on these loans.  

First mortgage delinquencies rose from 1.92 percent in August to 1.99 percent in September.Second mortgages rose from 1.27 percent in August to 1.32 percent in September.

However, both rates are lower than their levels one year ago when 3.02 percent of all first mortgages were delinquent and 2.14 percent of second mortgages were reported delinquent.

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California Foreclosure Activity Back Up

After dropping to a three-year low in the second quarter of this year, the number of California homeowners being pulled into the foreclosure process snapped back to prior levels over the last three months, a real estate information service reported.

A total of 71,275 Notices of Default (NoDs) were recorded at county recorders offices during the third quarter. That was up 25.9 percent from 56,633 for the prior three months, and down 14.4 percent from 83,261 in third-quarter 2010, according to San Diego-based DataQuick.

Last quarter's 71,275 NoDs, which mark the first step in the formal foreclosure process, jumped back to levels seen earlier this year and late last year. Lenders filed 68,239 NoDs during first-quarter 2011 and 69,799 in fourth-quarter 2010. NoDs peaked in first-quarter 2009 at 135,431.

Most of the loans going into default are still from the 2005-2007 period: the median origination quarter for defaulted loans is still third-quarter 2006. That has been the case for almost three years, indicating that weak underwriting standards peaked then.

The most active beneficiaries in the formal foreclosure process last quarter were Bank of America (14,325), Bank of New York (11,052), and Wells Fargo (9,740).

The most active trustees, companies doing the actual foreclosing, last quarter were ReconTrust Co (mostly for Bank of America and Bank of New York), Quality Loan Service Corp (Bank of America), California Reconveyance Co (JP Morgan Chase), Cal-Western Reconveyance Corp (Wells Fargo) and NDEx West (Wells Fargo).

Defaults by price segment show that distress is not spread evenly, with lower-cost neighborhoods bearing the brunt. Last quarter, zip codes with year-to-date median sale prices below $200,000 collectively saw 11.0 default notices filed per 1,000 homes. That compares with 8.1 NoDs filed per 1,000 homes for all zip codes statewide, and just 2.8 NoD filings per 1,000 homes in zips with medians above $800,000.

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Different mortgages default at different times: NBER report

"We find that the relaxation of borrowing constraints dominates early in the life of the mortgage," the authors state, "but default rates become larger than for principal-repayment mortgages late in the life of the mortgage due to the considerably higher probability of negative home equity."

Defaults tend to occur when a home enters a negative equity state, which is usually caused by several factors, including home price declines in a low inflation environment and large mortgage balances with little money down at the time of origination. However, after looking at mortgage default trends in other countries as well, Campbell and Cocco found that there is a variable lag time to when negative equity hits and the borrower stops making payments.

And with FHA 3.5% down payment loans being very popular.

Putting little down at the time of origination greatly increases the probability of default, the report concluded, with that probability increasing even more for loans with LTV ratios in excess of 90%.

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Millions of homes lurk on bank inventories, casting doubts of rebound

Clustered mostly in hard-hit cities and states, there are more than 4.5 million homes either owned by lenders or headed for foreclosure. In Miami, for example, there are about 200,000 shadow homes, dwarfing the 30,000 properties that are listed on the active market. Even as prices in Miami have shown signs of stability this year, an impending wave of foreclosures threatens to keep real estate values deflated.

"A lot of people don't understand how much inventory is set to come on line in the next 18 to 24 months," said Jack McCabe, the CEO of McCabe Research & Consulting in Deerfield Beach, Fla. "When you compare what the Realtors show as inventory to what's out there, you realize we have a long way to go."

A McClatchy Newspapers analysis of four years of foreclosure data and thousands of property records found record-high levels of shadow inventory in several housing markets across the nation.

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Foreclosures increase California

After months of a foreclosure slowdown caused by investigations into improper practices, the nation's home-repossession machinery is beginning to move again — particularly in states such as California where courts don't oversee the process.

The number of homes entering the foreclosure process surged 19% in the third quarter compared with the previous quarter in states where foreclosures take place largely outside of the courtroom, according to RealtyTrac, an Irvine information firm. These nonjudicial states include California, Nevada, Arizona, Oregon and Washington.

The reason why in these states.

"[The banks] are generally working through more of these loans, but the places where they can file the most quickly are going to be the nonjudicial states," said Celia Chen, a housing economist with Moody's Analytics.

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RealtyTrac anticipates rise in foreclosures

Data firm RealtyTrac says foreclosure filings plummeted 34% in the third quarter from a year earlier. However, the CEO said the market may be a bottom, with signs activity will likely begin to grow.

On average, properties stayed on the market longer in the third quarter. U.S. foreclosures spent on average 336 days in the default process. That's up from 318 days in the second quarter and the highest hold time reported in four years.

In the third quarter, foreclosure filings were reported on 610,337 properties, up less than one percent from the previous quarter and a drop of 34% from the third quarter of 2010.

"U.S. foreclosure activity has been mired down since October of last year, when the robo-signing controversy sparked a flurry of investigations into lender foreclosure procedures and paperwork," said James Saccacio, chief executive officer of RealtyTrac.

"While foreclosure activity in September and the third quarter continued to register well below levels from a year ago, there is evidence that this temporary downward trend is about to change direction, with foreclosure activity slowly beginning to ramp back up," he said

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Foreclosure backlog deepens

Once borrowers start missing payments, they spend an average of a year and nine months, or 611 days, in foreclosure before banks repossess their homes, according to LPS Mortgage Monitor. That's more than twice as long as three years ago, when the average was 251 days. Earlier his year, the average was 523 days.

"The number of defaults in the pipeline has been huge and we had more problem loans than ever before," said Herb Belcher, who supervises analytics for Lender Processing Services (LPS), which provides mortgage industry information and analytics to big banks.

With so many bad loans, servicers have had to prioritize which ones they can deal with and which ones to push aside.

"It's like your boat has all these holes in it and is taking in water. You have to plug up the worst holes first," said Belcher.

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LPS: Foreclosure starts up 20% in August

Foreclosure starts rose 20% in August from the prior month to the highest level of the year and mortgages facing foreclosure are delinquent an average of 611 days, the highest level yet.

Lender Processing Services' (LPS: 13.03 -0.61%) mortgage monitor report for August showed foreclosure starts fell more than 12% from a year earlier, and the national delinquency rate is 8.13%, which is 2.5% lower than the prior month.

In late August, the Federal Deposit Insurance Corp. said the combined delinquency rate on mortgages held by major banks dropped to 6.68% in the second quarter, the lowest level since the third quarter of 2009.

First-time delinquencies accounted for nearly one-quarter of new delinquencies in August, according to LPS. And 23% of the nearly 46 million loans that were current at the end of August are at risk of foreclosure due to negative equity.

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Mortgage help for unemployed disappears

The Housing Department, which had to approve the applications for the Emergency Homeowners' Loan Program by Friday, expects that only 10,000 to 15,000 people will qualify. That's only a small sliver of the roughly 100,000 who applied.

"No one could have anticipated how difficult the statutory requirements make it to reach homeowners," said Lemar Wooley, a HUD spokesman.

Those who make the cut are expected to receive between $35,000 and $45,000 in aid, he said.

Many had high hopes for the loan program because it was targeting a segment of delinquent homeowners not being helped by other federal initiatives, such as mortgage modifications.

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Proprietary Modifications Unchanged, Foreclosure Starts Rise

While proprietary loan modifications remained level from July to August, foreclosure starts increased 18 percent, rising from 185,000 in July to 218,000 in August.

Completed foreclosure sales also increased for the month, rising 5 percent from 65,000 to 68,000.

The number of homeowners 60 or more days delinquent fell slightly from July to August, falling from 2.81 million to 2.80 million.

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FHA loans have the most fees and are the costly loans

What this article left out is that the default rate on these loans are high, so mortgage insurance portion must be increased to cover the costs of these defaults.

"Like the conventional universe, the 4.5% coupon has now moved completely into the 40bp refinancing window," said Scott Buchta, managing director at Sandler O'Neill. "Higher (mortgage insurance) fees and a lack of a HARP-like program may prevent some FHA borrowers from refinancing."

There is strong possibility that most of these FHA borrower will strategically default.

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