The U.S. foreclosure inventory rate dropped to 1.88 percent in June, down 1.5 percent from May, according to a new report from Black Knight Financial Services. The total loan delinquency rate dropped to 5.7 percent in June, down 1.55 percent from May. The foreclosure inventory rate has declined for 26 straight months, and is currently at its lowest point since April 2008.
But the nation’s inventory of loans in foreclosure is disproportionately distributed in states with judicial foreclosure processes. According to Kostya Gradushy, Black Knight’s manager of research and analytics, while foreclosure inventories have been declining nationwide, judicial states’ foreclosure inventories are 3.5 times that of their non-judicial counterparts.
The sharp overall decline in foreclosure inventory "can obscure the stark difference that remains between judicial and non-judicial states," Gradushy said in a statement. "Although judicial states account for about 42 percent of all active mortgages, some 70 percent of loans in foreclosure are in these states.”
The share of loans in foreclosure in judicial states is 3.23 percent, down from a peak of 6.6 percent in January 2012, but still more than four times higher than the pre-crisis ‘norm.’ More than 60 percent of the foreclosure inventory in judicial states has been past due for two years or more, with an average delinquency period of 1,084 days, compared with 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 examined loan modification activity in its Mortgage Monitor report. Overall activity is down, with an average of just 45,000 modifications monthly so far in 2014. The report found that the number of modification’s made under the federal Home Affordable Modification Program (HAMP) has increased over the last five months. In May, HAMP accounted for over 60 percent of modifications, and for approximately 50 percent of all modifications so far this year.
The report also found that HAMP modifications were performing significantly better than privately backed mods in terms of re-default rates.
“In most cases, proprietary modifications were almost twice as likely to re-default six months after modification than HAMP-modified loans," Gradushy said in a statement.
The report also found that short sales volume is sharply decreasing. While distressed sales (REO or short sale) continue to decline overall, 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.
The top five states with highest percentage of delinquent loans were Mississippi, New Jersey, Florida, New York and Louisiana. Massachusetts had the fifth-highest rate of seriously delinquent loans (those 90 or more days past due) in the country, preceded only by Mississippi, Alabama, Rhode Island and Nevada.
