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Foreclosure Starts Reach 2007 Levels, LPS Explains Rise in Delinquencies

In September, the ""nation's delinquency rate suddenly spiked 7.7 percent"":http://dsnews.comarticles/lps-delinquency-rate-suddenly-spikes-in-september-2012-10-22 from August, according to data from ""Lender Processing Services"":http://www.lpsvcs.com/Pages/default.aspx (LPS). The data provider explained the surge in its recent Mortgage Monitor report for September.


For one, first time delinquencies increased by about 200,000 from the month before as more borrowers rolled into 30-day delinquency status. Re-default rates for modified loans did not seem to impact delinquencies.

LPS also noted payment and transactional activity was down month-over-month in September. For example, foreclosure starts (-21 percent), foreclosure sales (-18 percent), delinquent cures (-25 percent), and prepayment rates (-13 percent) all decreased. Cure counts for delinquencies one or two months past due saw an especially sharp drop month-over-month.


Herb Blecher, LPS Applied Analytics SVP, pointed to the bigger picture revealed in September's data.

""September's increase in the delinquency rate was indeed significant, but the overall trend is still one of improvement,"" Blecher said. ""Despite the monthly jump, delinquencies are down 30 percent from their January 2010 peak, and our analysis revealed some interesting factors related to the spike. Of course, one month's data does not indicate a trend. We will be monitoring these factors over the coming months to see how the situation develops.""

Delinquencies were still down 4.2 percent yearly, and serious delinquencies (90-plus days) fell 8.1 percent yearly.

Foreclosure starts, which numbered about 159,000, hit their lowest level since September 2007 and were down 27.9 percent yearly.

Foreclosure inventory in judicial states remained high at 6.26 percent and was nearly three times higher than the average in non-judicial states, 2.17 percent. The national average for foreclosure inventory stood at 3.87 percent.

When comparing non-judicial and judicial states, LPS says loss mitigation activity--short sales, deeds-in-lieu, and modifications--is actually similar for 90-plus delinquent inventory. The rate of new problem loans is also similar between both types of states.

LPS found originations in August were up 42.1 percent year-over-year, the highest level reached since 2009. Nearly a quarter of originations in August were from high loan-to-value HARP originations, LPS data revealed. LPS says the HARP eligible population may still include over 3 million loans.

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