style=’font-size: large’>Foreclosure inventory rates continue to climb due to an ongoing bottleneck in foreclosure sales – the result of governmental moratoria, reports Herb Blecher, vice president of Lender Processing Services' (LPS) Applied Analytics division. New data released in LPS' May Mortgage Monitor show that April closed with a 2.7% foreclosure rate, which represents a 7.3% increase over April and a year-over-year increase of 90.5%. ‘Sales have pretty much halted due to moratoriums, and this is, as a result, ballooning the foreclosure inventory,’ Blecher said during a recent conference call in which he detailed the report's findings. Foreclosure starts, though down compared to March's record-high numbers, remained high, he added. ‘We're off [March's] highs, but across all product types, we're pretty much looking at elevated levels.’ Some mortgage products are deteriorating faster than others, however. Subprime loans still have some of the largest absolute inventories, but the product's rate of deterioration has been relatively low for the last 16 months. The foreclosure percentage for jumbo prime loans, on the other hand, has shot up at a much faster rate since January 2008 – a trend that may continue for some time. Using third-payment delinquency rates as indicators, the LPS report found that most product types improved in quality beginning sometime last year. Jumbo prime loans, however, bucked the trend, as origination quality did not appear to improve until the first quarter of 2009. ‘The timing of that has definitely been a little later for jumbo prime,’ Blecher commented. [b][i]State trends[/i][/b] About one in 10 homes was in some stage of delinquency at the end of April, but that figure is strongly influenced by eight states that have a higher percentage of foreclosure inventories than the national average: Arizona, California, Florida, Illinois, Indiana, Ohio, Nevada and New Jersey. Florida's inventory percentage is particularly alarming, coming in at about three times the national average. Similarly, eight states were above the national average in foreclosure starts in April. That list mostly parallels the inventories list, although Illinois is conspicuously absent. Foreclosure starts in Illinois, Blecher pointed out, had nearly fallen off the chart, despite the fact that the Land of Lincoln had among the highest start rates as recently as April 2008. The reason, area attorneys have told [b][i]SM[/i][/b], has to do with an administrative order that went into effect April 1 and prohibits the scheduling of certain foreclosure cases. Seven states – Delaware, Maine, New Mexico, North Carolina, North Dakota, Washington and New York – saw an increase in foreclosure starts in April, according to LPS. ‘That's significant, because New York is a pretty high-volume state,’ Blecher said. Foreclosure starts in the Empire State, which boasts 4.5% of all loans in the U.S., have still increased over a 12-month period at a lower percentage than the national average (33% compared to the nationwide average of 35%). The Monitor also examined first-payment defaults by investor type. First-payment defaults for agency and government products have remained somewhat stable, although LPS has observed at least one imbalance: Portfolio loans have suffered far higher rates of early defaults. ‘The working assumption here is that Fannie, Freddie and FHA are being a little more aggressive as far as the warranties on some of these loans,’ and they are forcing the notes back onto servicers' books, Blecher said, citing feedback provided by listeners of April's conference call. [b][i]Loss mitigation[/i][/b] Term-only modifications, which made up approximately 95% of mods studied in January 2008, now constitute a considerably smaller piece of the loss mit pie. In April, slightly more than 20% of modifications were of the term-only variety. Rate/term mods remain the most popular, although servicers are more routinely turning to principal reductions, as well. Still, only about 5% of the mods studied in April included balance reductions. ‘I believe the regulators – and possibly some of the policy-makers – would like to see that number be a little larger,’ Blecher said. A possible reason for this sentiment? According to LPS, modifications involving unpaid principal-balance reductions experience a 25% lower recidivism rate at the six-mont