Lower mortgage rates are helping to improve the nation’s mortgage portfolio, with the U.S. delinquency rate dropping to 5.6 percent last December, a 12.7 percent drop from a year prior, according to a new report from real estate data and analytics firm Black Knight Financial Services.
The prepayment rate increased more that 25 percent during the month to the highest level since August 2013, as low mortgage rates pushed a wave of refinances. Foreclosure inventory also continued to decline; down nearly 35 percent from December 2013. However, the number of new foreclosure starts increased 21 percent increase from November 2014.
A deeper look into the numbers suggests that the overall health of the nation’s mortgage portfolio is continuing to improve. According to Black Knight, more than half of the loans that slipped into delinquency in November 2014 were brought back to current status in December. About a third of 30-day-delinquent loans stayed in that status, while only 13 percent slipped into 60-day delinquency, meaning the homeowner has missed a second mortgage payment. These numbers represent a slight improvement over trends in the later half of the year, when between 47 and 48 percent of loans which slipped into delinquency returned to current the following month.
The improving figures reverse a worrying slide begun in the prior month: November 2014 saw the largest monthly increase in delinquencies since November 2008. December 2014 delinquencies however, remain 3.8 percent above their October levels.
A boost in national home prices is also helping servicer’s balance sheets. As of October, the average foreclosure sale covered 71 percent of the loan’s unpaid balance, up from a low of just over 60 percent in January 2012. Foreclosure sales out-performed short sales in this regard; on average, only of 65 percent of the unpaid balance was recovered through short sales. Servicers performance to recovering unpaid balances through REO sales varied somewhat, with Fannie Mae and Freddie Mac averaging about 75 percent of the unpaid loan balance recovered, private lender loans averaging about 70 percent, and FHA loans averaging about 65 percent. All three classes of lenders have seen improvements in the amount of unpaid balance recovered in recent months, according to Black Knight.
Massachusetts ranked 21st among all states in is percentage of non-current loans in December, with 6.3 percent of Bay State loans in delinquency and 1.5 percent in foreclosure, for a combined 7.8 percent of non-current loans, slightly worse than the national non-current rate of 7.3 percent. However, the non-current rate in the Bay State is down 16.9 percent compared to the same time last year.
