Although the foreclosure inventory in the U.S. averaged 1.88% of all homes with a mortgage in June – down 1.5% compared to May and down significantly from the peak inventory rate of about 6.6% seen in January 2012 – it continues to be roughly 3.5 times higher in the judicial states compared to the non-judicial states; many state court systems are still facing challenges clearing out the backlog, according to Black Knight Financial Services' Mortgage Monitor Report.
In fact, the judicial states account for 42% of active mortgages yet more than 70% of foreclosure inventory, according to the report.
‘Nationally, the foreclosure inventory rate has declined for 26 straight months and is currently at its lowest point since April 2008, but this can obscure the stark difference that remains between judicial and non-judicial states,’ says Kostya Gradushy, manager of research and analytics for Black Knight, in a release. ‘Although judicial states account for about 42 percent of all active mortgages, some 70 percent of loans in foreclosure are in these states.
‘Today, the share of loans in foreclosure in judicial states is 3.23 percent – a significant decline from its January 2012 high of 6.6 percent, but still more than four times higher than the pre-crisis norm,’ Gradushy adds. ‘Further, more than 60 percent of the foreclosure inventory in judicial states has been past due for two years or more. In fact, these loans have been delinquent an average of 1,084 days, as compared to just 775 days in non-judicial states. The states with the highest number of average days past due for loans in foreclosure are all judicial states: New York and Hawaii are each above 1,300 days, while New Jersey and Florida both top 1,200 days.’
An interesting finding in this month's report is that Home Affordable Modification Program (HAMP) modifications are generally performing better than proprietary modifications. Gradushy says while modification volume is down overall, ‘the share of HAMP modifications has increased over the last five months.’
‘In May, HAMP accounted for more than 60 percent of modifications – and for approximately 50 percent of all modifications so far this year,’ Gradushy explains. ‘The data also showed that all vintages of HAMP modifications are performing significantly better in terms of re-default rates than proprietary modifications (those negotiated by the lender outside of HAMP) overall, as well as for modifications with reduced payments for the borrower. In most cases, proprietary modifications were almost twice as likely to re-default six months after modification than HAMP-modified loans.’
Finally, Black Knight found home sales volume rebounding as expected due to seasonal effects. Distressed sales (real estate owned [REO] or short sale) continue to decline overall, while short sales in particular are making up an ever-smaller share of that diminishing volume and selling for less of a discount than traditional sales.
After accounting for nearly 60% of all distressed sales at the end of 2012, short sales now make up fewer than 34% of non-traditional transactions, according to the report.
While short sale discounts are shrinking, those on REO properties remain stable at around 25%.
The report reveals that the total U.S. loan delinquency rate in June was 5.70% of all mortgages – an increase of about 1.55% compared to May.
States with the highest percentage of delinquent loans included Mississippi, New Jersey, Florida, New York and Louisiana.
States with the lowest percentage of delinquent loans included Minnesota, Montana, Colorado, South Dakota and North Dakota.
States with the highest percentage of seriously delinquent loans (60-plus days past due) included Mississippi, Alabama, Rhode Island, Nevada and Massachusetts.
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