Two years of steadily rising home prices has resulted in a significant reduction in the number of homeowners who are underwater on their mortgages.
‘Two years of relatively consecutive home price increases and a general decline in the number of distressed loans have contributed to a decreasing number of underwater borrowers,’ says Kostya Gradushy, manager of loan data and customer analytics for Black Knight. ‘Looking at current combined loan-to-value, we see that while four years ago 34 percent of borrowers were in negative equity positions, today that number has dropped to just about 10 percent of active mortgage loans.’
Although the number of homes moving through the foreclosure pipeline has dropped significantly in recent years, the amount of time it takes to process a foreclosure is growing longer. According to the report, as of March, the delinquency rate for loans in foreclosure averaged 966 days – and it is taking much longer to process foreclosures in the judicial states compared to the non-judicial states.
Gradushy says about ’55 percent of all loans in foreclosure are now more than two years delinquent – an all-time high.’
‘However, as a share of total aged inventory, fewer of these loans are completing the foreclosure process,’ he adds. ‘While it may seem counterintuitive, this is actually also indicative of an improving market. As there are fewer new foreclosure starts, not as many new problem loans, declining delinquencies and improving indicators all around, what's left are these loans lingering – for years – in the foreclosure pipeline.’
According to the report, home affordability (calculated as a ratio of mortgage payment to income) is actually better now than it was in the years prior to the housing crisis, though the level of affordability varies by state. At the national level, the mortgage-to-income ratio now stands at 22%, whereas in 2006, only four states were below this level. As of March, nearly two-thirds of the country fell below this line: Michigan, Missouri, Indiana and Iowa were the most affordable states, whereas New York and California were the least affordable.
According to the report, the total U.S. loan delinquency rate as of March was 5.52%, a decline of 7.57% compared to February. The total foreclosure pre-sale inventory rate was 2.13%, a decline of 4.23% compared to the previous month.
States with highest percentage of delinquent loans were Mississippi, New Jersey, Florida, New York and Maine.
States with the lowest percentage of delinquent loans included Montana, Colorado, Arkansas, South Dakota and North Dakota.
States with highest percentage of seriously delinquent loans included Mississippi, Nevada, Rhode Island, Alabama and Massachusetts.
The report also shows that Michigan, Missouri, Indiana and Iowa are the most affordable states to own a home, while New York and California are the least affordable.