While the national delinquency rate remains elevated and even increased slightly month-over-month in December, the delinquency rate ended the year 32 percent lower than the January 2010 peak, according to the December Mortgage Monitor report from Lender Processing Services (LPS).
The delinquency rate for December stood at 7.17 percent, up 0.7 percent from November, but down 9.1 percent from a year ago.
LPS also highlighted the diverging trends in judicial and non-judicial states, noting new problem loans (seriously delinquent loans that were current six months ago) are on the decline in non-judicial states but remain stable in judicial states. Out of the top 10 states with the highest share of non-current loans (delinquent or in foreclosure), seven are judicial states.
Foreclosure starts numbered 136,289 for December and are up 4.8 percent from the month before, but are down 23.6 percent year-over-year.
Foreclosure sales hit their lowest level since March 2009 after numbering 57,000, which represents a 19.6 percent month-over-month decrease.
Foreclosure inventory continues to shrink, with the foreclosure pre-sale inventory rate at 3.44 percent, which is a 2 percent drop from November and an 18 percent decrease from December 2011. From 1995-2005, before the crises began, the foreclosure rate averaged 0.53 percent, according to LPS.
In light of the Consumer Financial Protection Bureau's new servicing rules, LPS also analyzed the potential impact of the new guidelines, which go into effect January 2014. One of the rules requires servicers to wait 120 days before initiating the foreclosure process.
LPS found 30 percent of foreclosure starts in 2012 were prior to the 120-day delinquency period. On average, about 49,000 foreclosures per month were initiated on loans that were less than 120 days delinquent in 2012.
LPS also provided data on negative equity and estimates 19.70 percent of mortgages are underwater, which translates into 9.8 million loans. Compared to January 2012, when about 15.5 million loans were in negative equity, the number of underwater borrowers has decreased 35 percent, according to LPS.
Sand states continue to struggle with negative equity, with close to half--46.40 percent--of all homeowners in Nevada considered to be in negative equity. In Florida, more than a third--38.30 percent--of loans are in negative equity.