Interactive Electronic Group Research: foreclosure homes

LPS Applied Analytics released their December Mortgage Performance data. According to LPS:

• The average loan in foreclosure has been delinquent a record 507 days. This is up from 406 days at the end of 2009, and up from 499 days at the end of November.

• Overall, mortgage delinquencies dropped nearly 18% in 2010.

• On the other hand, foreclosure inventories were up almost 10% in 2010, and are now at nearly 8x historical averages

• “First-time” foreclosures are on the decline, with over 30% of new foreclosure starts having been in foreclosure before

Click on graph for larger image in graph gallery.

This graph provided by LPS Applied Analytics shows the percent delinquent, percent in foreclosure, and total non-current mortgages.

The percent in the foreclosure process is trending up because of the foreclosure moratoriums.

According to LPS, 8.83% of mortgages are delinquent (down from 9.02% in November), and another 4.15% are in the foreclosure process (up from 4.08% in November) for a total of 12.98%. It breaks down as:

• 2.56 million loans less than 90 days delinquent.

• 2.12 million loans 90+ days delinquent.

• 2.2 million loans in foreclosure process.

For a total of 6.87 million loans delinquent or in foreclosure.

The second graph shows the break down of serious deliquencies.

LPS reported "the share of seriously delinquent loans that have not made payments in over a year continues to increase.".

Note: I've seen some people include these 7 million delinquent loans as "shadow inventory". This is not correct because 1) some of these loans will cure, and 2) some of these homes are already listed for sale (so they are included in the visible inventory).

Sen. Jeff Merkley has unveiled a six-part plan to address the ongoing foreclosure crisis and boost the nation’s troubled housing market. David Dayen was at the announcement of the plan in Portland on Tuesday, and reports.

The “colossal disappointment” of the HAMP loan modification program, according to Merkley, necessitates a restart to the national conversation of how to heal the decaying housing market. The confusion in the market, as well as the continued flood of foreclosures, creates uncertainty for working families and the economy. “We’re not going to see a true economic recovery until we do something about the broken housing market,” said Senator Merkley at the event. “I met with Portland homeowners today who dealt with months of confusing instructions to get a mortgage modification, only to be told 10 months later they didn’t qualify and their home was facing foreclosure. My plan will put homeowners first and foreclosures last.”

Here are the six points to the Merkley proposal:

A national short refinance program. When a bank sends a home into foreclosure, it becomes an REO property, to be sold at auction at a large loss for the investors. Instead of going through the long process of resale, with the attendant upkeep that has to be spent by the bank on the home, and the disruption to the property values from having a vacant home in their neighborhood, this short refi program would allow qualified families facing eviction to refinance to an FHA-guaranteed mortgage based on current property values and interest rates....

Ending dual track. The family highlighted at today’s event, Connie and Michael Umphress, were current on their mortgage when they sought a modification with Wells Fargo. The servicer encouraged them to miss a payment to qualify for the private modification, and then reduced the loan in the trial period. But at the same time, they pursued foreclosure actions. So Connie and Michael got foreclosure notices while they negotiated the modification process. Merkley’s plan would end this highly stressful dual track process, and suspend foreclosure actions while families sought a modification....

Single point of contact. Borrowers aiming for a modification usually talk to a different person at their servicer every single time they establish contact. This means they have to explain their situation all over again, and increases the possibility for mistakes. Merkley would establish a single point of contact between the borrower and the lender.

Third party review. Similar in spirit to Sen. Al Franken’s proposed Office of Homeowner Advocate, this would create an independent third-party review process for families facing foreclosure. It would check to see if the borrower explored every option to avoid foreclosure, and possibly initiate a mediation process with a sit-down between the borrower and the servicer....

Lifeline bankruptcy reform. This is basically cram-down, the ability for bankruptcy judges to treat primary residence mortgages the same way they treat vacation homes, second homes, boats or virtually any other asset....

Homebuyer’s tax credit. I’m not such a fan of this proposal, but as Merkley describes it, he would generally target it toward first-time homebuyers purchasing “modest” homes....

Merkley hopes his proposal would spark a conversation in Washington about how to fix the housing market. HAMP has completely failed; as Merkley noted today, less than $1 billion has been spent to mitigate foreclosures, out of a promised $50-75 billion. “We are not through the foreclosure crisis, so we must have a second national conversation,” Merkley said. He invited other proposals from members of Congress.

Merkley is absolutely right--we do have to have the second national conversation. The housing crisis hasn't diminished as home prices continue to fall, and more and more homeowners become underwater on their mortgages. The next solution should focus on stopping the foreclosure crisis--and foreclosure fraud--and keeping borrowers in their homes, rather than on keeping the banks profitable.

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Interactive Electronic Group Research

Tuesday, February 15, 2011

foreclosure homes

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