Market Studies

Residential mortgage foreclosure rates continue to fall in Texas, dropping to 1.89 percent during the first quarter of 2011 - well below the national average of 4.52 percent. The Lone Star State now has the sixth lowest foreclosure rate in the country. Mortgage bankers in the state say the numbers provide further evidence that Texas has one of the best lending landscapes in the country.

Fannie Mae's latest market outlook continues to call for a ""modest improvement"" in housing activity this year, although the prevalence of distressed properties on the market has led to renewed weakness in home prices and the industry's shadow inventory looms large. The GSE's chief economist notes that as the economic recovery approaches its two-year anniversary in June, housing has not yet contributed to economic growth in any meaningful way and is significantly underperforming compared to previous market recoveries.

According to data released by S&P Indices and Experian, the default rate on second lien mortgages has increased for the first time in at least five months. The agencies' report shows second mortgage defaults rose from 1.42 percent in March to 1.51 percent in April. First mortgages, on the other hand, saw a decrease in default rates. These results are based on data extracted from Experian's consumer credit database, which covers approximately $11 trillion in outstanding loans sourced from 11,500 lenders.

The nonprofit counseling agency CredAbility released the results of its first-quarter Consumer Distress Index Thursday. While the average U.S. household is still in financial distress - and has been for 10 consecutive quarters - the agency says the index has hit its highest score in two and a half years. CredAbility attributed the positive movement to the fact that employment levels rose and consumers now have a better handle on managing household budgets. On the flip side, the score dropped in the housing category.

Fixed mortgage rates have dropped for the fifth consecutive week to put them at their lowest point of the year. The declines continue despite reports of mixed economic and housing data. Adjustable-rate mortgages (ARMs), on the other hand, increased for the first time in over a month. Freddie Mac reports that 30-year fixed mortgage rates are now averaging 4.61 percent, while the 15-year rate is at 3.80 percent.

Foreclosure filings and foreclosure sales at auction in Colorado's metropolitan counties declined during April, according to a report by the Colorado Division of Housing. It was the fifth consecutive month where both filings and sales were down in the state when compared to the same month a year earlier. Foreclosure filings hit a 31-month low in March of this year but have risen slightly since.

Industry data released Thursday shows a sharp drop in the percentage of home loans 90 or more days past due or in foreclosure. The Mortgage Bankers Association (MBA) reports 90-plus day delinquencies have dropped for five straight quarters, while the nation's foreclosure inventory recorded its largest decline since the trade group began tracking the market. At least one economist says the combination is a sign of ""genuine improvement."" Remaining troubles appear to be concentrated in a handful of states. Five account for over half of the loans in foreclosure in the country.

The National Association of Realtors said Thursday that the share of distressed home sales dropped last month, accounting for 37 percent of total existing-home sales volume, down from 40 percent in March. Overall, sales of previously owned homes fell back 0.8 percent in April, to an annual sales pace of 5.05 million. Realtors in the field say the numbers are being impacted by low appraisals that result in contract cancellations. There were 3.87 million existing homes available for sale in April, which represents a 9.2-month supply.

A new study conducted by Trulia and RealtyTrac found that 56 percent of U.S. renters and 47 percent of current homeowners are at least ""somewhat likely"" to purchase a foreclosed home. Along with having some concerns about hidden costs and still-declining home values, many potential buyers expect to save money if they buy a foreclosure. On average, survey respondents said they would expect to pay 38 percent less for a foreclosed home than a similar home that was not in foreclosure - not too far above today's average discount of 36 percent.

Loans backing commercial mortgage-backed securities (CMBS) that were liquidated at a loss in the first quarter carried an average loss severity of 38 percent, according to Moody's Investors Service. That figure represents a decline from 40 percent for the previous quarter and was the first reduction in the severity of losses since the fourth quarter of 2008. During the month of April, CMBS loans totaling $2.9 billion became newly delinquent, while previously delinquent loans for $3.0 billion became current, worked out, or were liquidated.