Disproportionate Foreclosure Distribution; Good Reviews for HAMP Mods

News

As it indicated in its “first look” at
June mortgage performance data released last month, Black Knight Financial
Services said today that the nation’s foreclosure inventory – those mortgage
loans in process of foreclosure – is disproportionately distributed in states
that use a judicial process, i.e. require a courts approval for a lender to
complete the repossession of a home.   
The company’s Mortgage Monitor Report for June takes a closer look at
these inventories which, while declining nationally, are 3.5 times as high in
judicial as in non-judicial states.

 

 

Kostya Gradushy, Black Knight’s manager of
Research and Analytics pointed out that the foreclosure inventory rate has
declined nationally for 26 straight months and it currently at its lowest level
since April 2008.  “But this can obscure the stark difference that remains
between judicial and non-judicial states. 
Although judicial states account for about 42 percent of all active
mortgages, some 70 percent of loans in foreclosure are in these states,” he
said.   “Today, the share of loans in foreclosure in
judicial states is 3.23 percent – a significant decline from its January 2012
high of 6.6 percent, but still more than four times higher than the pre-crisis
‘norm.’ Further, more than 60 percent of the foreclosure inventory in judicial
states has been past due for two years or more. In fact, these loans have been
delinquent an average of 1,084 days, as compared to just 775 days in
non-judicial states. The states with the highest number of average days past
due for loans in foreclosure are all judicial states: New York and Hawaii are
each above 1,300 days, while New Jersey and Florida both top 1,200 days.”

 

 

Black
Knight also looked at loan modifications and found that overall activity was
down to an average of 45,000 modifications per month thus far in 2014.  However, Gradushy points out that the share
of modifications through the Home Affordable Modification Program (HAMP) has increased
over the last five months and the joint Housing and Urban Development and
Treasury Department program accounted for over 60 percent of all modifications
in May and 50 percent for the first five months of the year. “The data also
showed that all vintages of HAMP modifications are performing significantly
better in terms of re-default rates than proprietary modifications (those
negotiated by the lender outside of HAMP) overall, as well as for modifications
with reduced payments for the borrower. In most cases, proprietary
modifications were almost twice as likely to re-default six months after modification
than HAMP-modified loans,” he said.

 

 

Black
Knight also noted that prepayments of mortgages, usually closely tied to refinancing
activity
, have picked up in the last few months.  It notes an increase in prepays among more
recent vintages of mortgages, those originated between 2009 and 2012.  It also said that prepays were highest among mortgages
held by individuals with the highest credit scores and that there was
significant regional variation with the West and Midwest in the main having more
prepay activity that the Northeast and South.

Originations
have also been recovering
from the trough they hit in late 2013, but
refinancing, with 35 percent of originations, is at its lowest point since
2008.  The government share of
originations remains over 80 percent.

Finally, Black Knight found home
sales volume rebounding as expected due to seasonal effects. Distressed sales
(REO or short sale) continue to decline overall, while short sales in
particular are making up an ever-smaller share of that diminishing volume and selling
for less of a discount than traditional sales. After accounting for nearly 60
percent of all distressed sales at the end of 2012, short sales now make up
fewer than 34 percent of non-traditional transactions. While short sale
discounts are shrinking, those on REO properties remain stable at around 25
percent.

 

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