Black Knight: Foreclosure Timelines Putting A Drag On Recovery

Although mortgage delinquencies and foreclosures have fallen considerably during the past two to four years, longer foreclosure timelines, particularly in the judicial states, are putting a drag on the housing recovery, according to Black Knight Financial Services' Mortgage Monitor Report for December 2013.

The report finds that 2013 marked the fourth consecutive year of significant, sustained improvement in the nation's inventory of delinquent mortgages and the second consecutive year of significant improvement for those in foreclosure. Delinquencies are now just 1.5 times what they were pre-crisis – and although foreclosures are still 4.6 times what they were, they have declined from their peak of more than eight times the historical norm.

‘In many ways, 2013 marked an abatement to crisis conditions in the U.S. mortgage market,’ says Herb Blecher, senior vice president of Black Knight Financial Services' Data & Analytics division. ‘Delinquencies neared pre-crisis levels, foreclosure inventory declined 30 percent over the year, new problem loan rates improved in both judicial and non-judicial foreclosure states, and foreclosure starts ended the year at the lowest level since April 2007.’

Blecher adds that, despite a recent drop off in existing home sales, ‘2013 was also the best year for property sales since 2007, with totals through November outnumbering the full year totals for each of the prior three years.’ What's more, stricter underwriting standards have resulted in 2013 originations being ‘the best-performing loans on record.’

‘However, at the same time, higher interest rates and seasonality pushed monthly originations to the lowest level since 2008, and the current interest rate environment seems to have also brought an end to the refinancing wave we've observed for the last several years,’ Blecher says. ‘In fact, refinance activity has remained low despite year-end declines in interest rates. With continued tapering anticipated by the market, opportunities for new originations will likely come from looser underwriting and/or home equity lending, which has shown a sizable increase in volume since last year.’

Blecher says although home sales increased 8.5%, year-over-year, as of November, home prices in judicial states generally recovered at a slower pace than their non-judicial counterparts.

‘A similar situation existed with regard to negative equity improvement, which also occurred more slowly in those areas with extended foreclosure processes,’ he adds. ‘With 75 percent of loans that are either seriously delinquent or in foreclosure being 'underwater,' the resolution of these inventories in many regions – and the speed at which that has occurred – has had a pronounced effect on reducing overall negative equity numbers.’

According to the report, the total U.S. loan delinquency rate reached 6.47% in December, an increase of 0.26% compared to November.

The total U.S. foreclosure presale inventory rate reached 2.48%, a decrease of 0.74% compared to November.

States with highest percentage of non-current loans included Mississippi, New Jersey, Florida, New York and Louisiana.

States with the lowest percentage of non-current loans include Montana, Colorado, Arkansas, San Diego and North Dakota.


Please enter your comment!
Please enter your name here