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May Foreclosure Starts Nearly Triple Sales: LPS

In May, foreclosure starts outnumbered foreclosure sales by a near 3-1 ratio, according to a ""report"":http://www.lpsvcs.com/LPSCorporateInformation/CommunicationCenter/DataReports/Pages/Mortgage-Monitor.aspx from ""Lender Processing Services"":http://www.lpsvcs.com/Pages/default.aspx (LPS).


Even though foreclosure starts and sales saw similar monthly increases in May, 11.6 percent and 10 percent respectively, the actual number of foreclosure starts was significantly higher than foreclosure sales. Foreclosure starts numbered 202,707 while foreclosure sales totaled 73,439.

Also, foreclosure inventory maintained historically high levels at 4.14 percent.

LPS Applied Analytics SVP Herb Blecher said the situation is more nuanced when looking at the breakdown between states that apply judicial versus non-judicial foreclosure processes.

""There's a stark contrast in foreclosure inventories between judicial and non-judicial states,"" said Blecher. ""In the former, 6.5 percent of all loans are in some stage of foreclosure - that's more than 2.5 times the rate in non-judicial states where only 2.5 percent of loans are currently in the foreclosure pipeline.


Blecher added both figures are significantly higher than the pre-crisis average of 0.5 percent, but noted the average yearly decline in non-current loans for judicial states is less than one percent compared to 7.1 percent in non-judicial states.

Unlike non-judicial states, lenders must receive court approval before initiating a foreclosure. This leads to a longer timeline for when foreclosures actually exit the pipeline.

In non-judicial states, foreclosure sales were three times greater than in judicial states, with 6.46 percent of foreclosure inventory making its way out of the foreclosure pipeline in May compared to only 2.14 percent in judicial states. Judicial states also hold a much higher percentage of past due loans that are more than two years old. In judicial states, about 53 percent of loans in foreclosure have been delinquent for more than two year compared to just over 30 percent of loans in non-judicial states.

At 7.2 percent, delinquencies in May were up slightly by 1.1 percent, but down almost 12 percent a year ago.

LPS uses loan-level residential mortgage data and performance information on nearly 40 million loans for its monthly report.

*States with highest percentage of past due loans*

# Florida
# Mississippi
# New Jersey
# Nevada
# Illinois

*States with the lowest percentage of past due loans*

# Montana
# Alaska
# South Dakota
# Wyoming
# North Dakota

About Author: Esther Cho


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