Even as home prices tentatively rise, the gorilla in the room is growth in delinquent loans.
Delinquent loans are up for several reasons. Obama is doing everything he can to prevent foreclosures, which means more mortgages languish in delinquency. More Americans are poorer than ever, and are unable to pay the mortgage. Others have caught the default contagion and may be flirting the idea of a strategic default.
What happens if delinquent loans become foreclosures and flood the market is a severe drop in home prices.
The evidence is in the latest Mortgage Monitor from LPS.
See the evidence here >
February delinquencies were up 21.3% from last year
Image: LPS
Source: LPS
Foreclosure inventory is up 51.1% from last year
Image: LPS
Source: LPS
Inventory is bloated with non-current loans
Image: LPS
Source: LPS
Red dot means a major foreclosure problem
Image: LPS
Source: LPS
Red dot means a major foreclosure and/or delinquent loan problem
Image: LPS
Source: LPS
Loans are going bad at record rates
Image: LPS
Source: LPS
1,145,000 loans went bad from Jan. to Feb.
Image: LPS
Source: LPS
Nevada and Mississippi are at the heart of the delinquent mortgage spike
Image: LPS
Source: LPS
Foreclosed homes are not selling
Image: LPS
Source: LPS
Although FHA production declining…
Image: LPS
Source: LPS
And although FHA origination attributes have improved…
Image: LPS
Source: LPS
FHA loans are still going bad at rising rates
Image: LPS
Source: LPS
Even at moderate credit scores
Image: LPS
Source: LPS
Even at good credit scores
Image: LPS
Source: LPS
2008 FHA loans are going bad as quickly as other high risk products
Image: LPS
Source: LPS
An unprecedented volume of FHA loans are in advanced delinquency
Image: LPS
Source: LPS
But it’s not all bad news
While delinquent loans present a huge risk, other aspects of the housing market are getting better.
Better loan practices will decrease the number of new delinquencies. A strong-enough recovery in prices could salvage underwater mortgages, removing the incentive to default.
February is a clear improvement
Image: LPS
Source: LPS
Delinquent loans are improving at record rates
Image: LPS
Source: LPS
HAMP is helping
Image: LPS
Source: LPS
Although more loans deteriorated than improved…
Image: LPS
Source: LPS
The ratio of deteriorating-to-improving loans is improving
Image: LPS
Source: LPS
Roll rate into foreclosure is down (thanks to high number of delinquent loans)
Image: LPS
Source: LPS
Recent deterioration rate (red) is bad… but things have been worse (gray)
Image: LPS
Source: LPS
Banks have become slower to foreclose on delinquent loans
Image: LPS
Source: LPS
Jumbo loans are in decline
Image: LPS
Source: LPS
Jumbo loan standards have improved
Image: LPS
Source: LPS
Almost all jumbo loans have solid credit scores
Image: LPS
Source: LPS
First payment default rates for all loans are down
Image: LPS
Source: LPS
Read more…
Image: Zillow
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