Foreclosure

The number of underwater homeowners has declined for the second consecutive quarter. CoreLogic reports that 11 million borrowers owed more on the loan than their home was worth at the end of June. That equates to 23 percent of all residential properties with mortgages, and is down from 11.2 million, or 24 percent, at the end of March. It seems like good news on the surface, but the company says foreclosures, rather than meaningful price appreciation, were the primary driver behind the change in negative equity.

Foreclosure starts dropped during the second quarter and the inventory of homes in the process of foreclosure fell for the first time since 2006, the Mortgage Bankers Association reported Thursday. Loans 90 days or more past due also decreased. But it's a different story at the other end of the spectrum. After declining since the beginning of 2009, the number of 30-day delinquencies is going up. Overall, 13.97 percent of the nation's mortgages were delinquent or in foreclosure at the end of Q2, down from 14.01 percent three months earlier.

Last Thursday, lenders reached 100,000 foreclosures in the tri-county South Florida region since the real estate crash began in 2007, according to the consulting firm CondoVultures.com. The company put South Florida's real estate crash into perspective by pointing out that lenders have repossessed an average of 75 properties per day since January 2007. The number of bank repossessions there are expected to decrease, though, since foreclosure filings for the year are down by roughly one-third compared to 2009.

Chase says it ""remains committed to helping customers avoid foreclosure."" In an announcement issued Wednesday, the bank outlined several key initiatives it has undertaken to better serve borrowers who are struggling with their mortgage payments, including adding 8,000 loan counselors and staffers to work directly with homeowners, assigning a specific counselor to each customer, and establishing a centralized location for document collection and imaging.

Default rates in July declined for first mortgages, but a larger number of homeowners fell behind on their second lien payments, according to data released jointly by Standard & Poor's and Experian. The companies' credit indices show defaulting balances on first mortgages were 3.2 percent last month, down from June's 3.3 percent, demonstrating continued improvement in the performance of first lien home loans. Second mortgage defaults, however, increased to 2.8 percent from 2.4 percent the month prior.

Default process management software provider DRI Management Systems, Inc., has announced its new Web-based, loan servicing application for the mortgage industry, Rincon. According to the California-based company, the Rincon platform helps overburdened servicers keep pace with demands for borrower assistance. Rincon is expected to double or triple the workload each servicing specialist can handle.

According to a report from state attorneys general and bank supervisors from across the country, more than 60 percent of homeowners with seriously delinquent loans are still not involved in any form of loss mitigation with their servicer. The ratio is disconcerting considering the group also found that loan modifications today are resulting in significant payment reductions with fewer redefaults. Absent improvements in foreclosure prevention efforts, the group expects hundreds of thousands of foreclosures will occur later this year.

The Arizona Superior Court issued a ruling this month that allows San Diego-based receivership and loan recovery specialist Trigild to sell seven Arizona apartment complexes to Standard Portfolio for $123 million. The 2,759-unit portfolio was abandoned last year by the investment firm Bethany Group and placed into receivership in March 2009. The court's ruling allows the properties to be sold without requiring the lender to foreclose prior to the sale.

Real Property Management says it has transitioned thousands of REO properties into rentals by using a lease and hold strategy. The company offers its rental initiatives to former owners of foreclosed properties or to new tenants, and says local, regional, and national banks, as well as other mortgage owners are now turning to a lease and hold strategy as REO inventories balloon.

Despite the continued efforts of mortgage giants Fannie Mae and Freddie Mac to find sustainable workouts for delinquent borrowers, the analysts at Standard & Poor's expect the GSEs' foreclosure inventories to continue to swell. The two companies have each already completed about 40 percent more workout volume during the first half of 2010 than they did in all of 2009. Still, the ratings agency says annualized loan workout activity (as a percentage of existing delinquent loans) remains less than half at both institutions.