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LPS’ October Mortgage Monitor: Foreclosure Starts Down; Decline Likely Temporary as Industry Adapts to New National Mortgage Settlement Requirements
October Prepayment Rates Point to Increase in Originations for Month
JACKSONVILLE, Fla. – Dec. 5, 2012 – The October Mortgage Monitor report released by Lender Processing Services (NYSE: LPS) showed a significant decline in foreclosure starts for the last two months – down 21.9 percent in October and almost 48 percent on a year-over-year basis – leading to a nearly 7 percent drop in overall foreclosure inventory. However, as LPS Applied Analytics Senior Vice President Herb Blecher explained, this fall-off in foreclosure starts is likely a temporary phenomenon, driven by new borrower notification requirements called for in the National Mortgage Settlement.
“LPS observed a drop-off in foreclosure starts in September that accelerated in October,” Blecher said. “This decline coincided with the implementation of new procedural changes outlined in the National Mortgage Settlement, which requires, among other things, that mortgage servicers provide written notice to borrowers 14 days prior to referring a delinquent loan to a foreclosure attorney. This has resulted in what is likely a temporary slowdown in foreclosure starts that we do not believe is indicative of a longer-term trend. However, we will continue to monitor this activity closely in the coming months.”
This month’s Mortgage Monitor also drew upon data from the LPS Home Price Index, to look at both the trajectory of home price increases as well as the make-up of residential real estate transactions. While appreciation continues to rise nationally – U.S. home prices were up 3.6 percent year-over-year in September and on track to gain between 5-7 percent for 2012 – overall sales volumes remain relatively low. During the past 12 months, there have been approximately 4.1 million residential real estate sales, less than half the annualized rate at the market’s peak in November 2005. Further, 1.3 million of those transactions have been distressed sales, compared to just 226,000 at the peak. As a point of reference, despite 2012’s healthy rate of appreciation, home prices are still nearly 23 percent off their June 2006 peak.
Looking at the current state of mortgage originations, LPS found that September loan originations were down, likely due to the shortened number of business days in the month. However, prepayment speeds (historically a good indicator of refinance activity) rebounded in October, and as such, LPS expects to see overall origination numbers pick up for that month. LPS also found that mortgage spreads remain elevated, averaging 197 basis points above the 10-Year Treasury rates, with interest rates consistent across all product types.
As reported in LPS’ First Look release, other key results from LPS’ latest Mortgage Monitor report include: Total U.S. loan delinquency rate: 7.03% Month-over-month change in delinquency rate: -4.91% Total U.S. foreclosure pre-sale inventory rate: 3.61% Month-over-month change in foreclosure pre-sale inventory rate: -6.77 %
States with highest percentage of non-current* loans: FL, MS, NJ, NV, NY
States with the lowest percentage of non-current* loans: MT, WY, SD, AK, ND
*Non-current totals combine foreclosures and delinquencies as a percent of active loans in that state. Totals are extrapolated based on LPS Applied Analytics’ loan-level database of mortgage assets.
About the Mortgage Monitor
LPS manages the nation’s leading repository of loan-level residential mortgage data and performance information on nearly 40 million loans across the spectrum of credit products. The company’s research experts carefully analyze this data to produce a summary supplemented by dozens of charts and graphs that reflect trend and point-in-time observations for LPS’ monthly Mortgage Monitor Report. To review the full report, visit http://www.lpsvcs.com/LPSCorporateInformation/CommunicationCenter/DataReports/Pages/Mortgage-Monitor.aspx
About Lender Processing Services
Lender Processing Services (NYSE: LPS) delivers comprehensive technology solutions and services, as well as powerful data and analytics, to the nation’s top mortgage lenders, servicers and investors. As a proven and trusted partner with deep client relationships, LPS offers the only end-to-end suite of solutions that provides major U.S. banks and many federal government agencies the technology and data needed to support mortgage lending and servicing operations, meet unique regulatory and compliance requirements and mitigate risk.
These integrated solutions support origination, servicing, portfolio retention and default servicing. LPS’ servicing solutions include MSP, the industry’s leading loan-servicing platform, which is used to service approximately 50 percent of all U.S. mortgages by dollar volume. The company also provides proprietary data and analytics for the mortgage, real estate and capital markets industries.
LPS is headquartered in Jacksonville, Fla., and employs approximately 8,000 professionals. The company is ranked on the Fortune 1000 as the 877th largest American company in 2012. For more information, please visit www.lpsvcs.com.