Mortgage delinquencies dropped to 6.41% in July, a decrease of 3.96% compared to June, according to Lender Processing Services' (LPS) First Look report.
In addition, the foreclosure presale inventory rate dropped to 2.82%, down 3.46% compared to the month prior.
So far, 2013 has produced the lowest level of foreclosure starts since 2007, the report finds.
‘Given that nearly 50% of these are repeat foreclosures means that the picture is even more positive than a surface reading of the numbers might suggest,’ notes Herb Blecher, senior vice president, data & analytics, for LPS.
States with highest percentage of non-current loans (delinquencies and foreclosures combined) in July were Florida, Minnesota, New Jersey, New York and Maine, while states with the lowest percentage of non-current loans included Wyoming, Montana, Arkansas, South Dakota and North Dakota.
The report finds that distressed sales (REO and short sales) decreased from 650,000 in June 2012 to 463,000 in June 2013, a drop of nearly 30%. Short sales, in particular, have dropped significantly in the past year – down from about 104,000 in June 2012 to about 46,000 in June of this year – a decrease of nearly 60%.
In addition, the report finds that loan origination volume slowed slightly from May to June. However, loan origination volume was the best it has been since 2007 during the period from June 2012 to June 2013.
As has been the case for some time now, prepayment activity is still largely driving origination volume.
‘Prepayment speeds have been impacted by the sharp increase in mortgage interest rates we've seen over the last couple months,’ says Blecher. ‘However, even with that increasing interest rate pressure, July's monthly prepayment rates are still about where they were this time last year, when rates were at historic lows.’
Blecher notes that prepayment rates are, in fact, ‘roughly at the same levels as the heights of the 'mini refinance booms' in 2010 – when interest rates were comparable to where they are today – and in 2009, when rates were even higher.’
‘Of course, as interest rates continue to climb, we can expect that both prepayments and associated originations will decline,’ he adds. ‘It's notable, however, that we saw an increase in prepayment activity in July among higher loan-to-value (LTV) mortgages – those with LTVs of 100% or more – indicating continued HARP refinance activity.’
Blecher says when LPS looked at the delinquency rate for what are likely to be HARP loans 12 months after origination, ‘We found that while delinquencies were higher than traditional (below 80% LTV) GSE loans – at approximately 1.2% – this group is performing better than both pre-crisis GSE loans and post-crisis FHA loans – which both averaged 4% delinquency rates at 12 months of age.’
To view the full report, click here.
