RealEstateEconomyWatch.com

A report by Lender Processing Services today confirms Fitch Ratings’ analysis yesterday that the volume of defaulted loans moving to REO status has fallen to a trickle as a consequence of the Robo-gate scandal, contributing to a backlog of foreclosures that threatens to reverse the overall decrease in foreclosure inventory caused by the steady decline in new delinquencies last year.

Even though most moratoria have been lifted, Fitch reported that the flow of defaulted loans into REOs will continue to be slow due to outside scrutiny and servicers’ concerns over legal liability.  As a result, Fitch extended its estimate of the time it will take to clear the current inventory of distressed properties to four years.  See Robo-gate Will Haunt REO Inventory for Four Years.

LPS said the total number of delinquent loans is nearly twice as high as historical averages - and foreclosure inventory is currently 7.8 times higher than historical averages and is rising. Just over 2.1 million loans are 90 days or more delinquent but not yet in foreclosure, with nearly 6.9 million loans in some stage of delinquency or foreclosure.

The report also found that over one-third of borrowers with loans that are 90 days or more delinquent have not made a payment in over a year. Self-cures for loans one-to-two months delinquent declined slightly in December, and late-stage cures, usually related to modification activity, continue to decline. In December, 259,518 loans were referred to foreclosure, which represents a 0.6 percent month-over-month decline.

Other key results from LPS’ latest Mortgage Monitor report include:

Total U.S. loan delinquency rate:  8.83 percent

Total U.S. foreclosure inventory rate:  4.15 percent

Total U.S. non-current* loan rate:  12.98 percent

States with most non-current* loans:  Florida, Nevada, Mississippi, Georgia, New Jersey

States with fewest non-current* loans:  North Dakota, South Dakota, Alaska, Wyoming, Montana

*Non-current totals combine foreclosures and delinquencies as a percent of active loans in that state.

Note: Totals based on LPS Applied Analytics’ loan-level database of mortgage assets and are extrapolated to represent the industry.