Black Knight, formerly LPS Financial Services, reports that 2013 marked the fourth consecutive year of significant, sustained improvement in the nation’s inventory of delinquent mortgages, and the second consecutive year of significant improvement for those in foreclosure. Delinquencies were just 1.5 times their pre-crisis average, with foreclosures down to 4.6 times their pre-crisis levels (declining from more than eight times the historical norm).
“In many ways, 2013 marked an abatement to crisis conditions in the U.S. mortgage market,” said Herb Blecher, senior vice president of Black Knight Financial Services’ Data & Analytics division. “Delinquencies neared pre-crisis levels, foreclosure inventory declined 30 percent over the year, new problem loan rates improved in both judicial and non-judicial foreclosure states, and foreclosure starts ended the year at the lowest level since April 2007. Despite a recent drop off, 2013 was also the best year for property sales since 2007, with totals through November outnumbering the full year totals for each of the prior three years. In addition, as we’ve noted before, due to stricter underwriting, 2013 originations have proven to be the best-performing loans on record.
“However, at the same time, higher interest rates and seasonality pushed monthly originations to the lowest level since 2008, and the current interest rate environment seems to have also brought an end to the refinancing wave we’ve observed for the last several years. In fact, refinance activity has remained low despite year-end declines in interest rates. With continued tapering anticipated by the market, opportunities for new originations will likely come from looser underwriting and/or home equity lending (which has shown a sizable increase in volume since last year).
“On the home price front, while national levels rose 8.5 percent year-over-year through November 2013, we did see home prices in judicial states generally recovering at a slower pace than their non-judicial counterparts. A similar situation existed with regard to negative equity improvement, which also occurred more slowly in those areas with extended foreclosure processes. With 75 percent of loans that are either seriously delinquent or in foreclosure being ‘underwater,’ the resolution of these inventories in many regions (and the speed at which that has occurred) has had a pronounced effect on reducing overall negative equity numbers.”
The December 2013 data also showed that, even in most states with judicial or legislative slow-downs, foreclosure pipelines have been clearing over the last half of 2013. Massachusetts, for example, has seen its pipeline ratio decline by 49 percent since June, while New York and New Jersey have come down 39 and 37 percent, respectively. On the other hand, California – which enacted its Homeowner Bill of Rights at the start of 2013 – has seen its pipeline ratio increase by 36 percent in the last six months. Overall, judicial states’ foreclosure inventories remain 3.5 times as large as those in non-judicial states.