The number of distressed borrowers receiving loan modifications and short sales declined in the third quarter as foreclosure starts continued to fall, suggesting a new equilibrium has been reached in the housing market.
Foreclosure starts alone declined 42% year-over-year in the third quarter with only 290,000 actions filed, down from 499,000 a year ago, according to Hope Now, an alliance of private firms and nonprofits working together to save borrowers.
This improvement not only shows the housing market's continued improvement over the past year, it also highlights the ongoing success of programs designed to keep borrowers in their homes, Hope Now indicates.
As foreclosure activity declines, Hope Now is reporting fewer loan modifications, foreclosure sales and short sales when comparing the most recent third-quarter to last year.
Hope Now recorded 181,000 loan modifications in the third quarter, down 22% from 233,000 in 3Q 2012.
Foreclosure sales in Q3 also reached 167,000, a decline of 15% from 196,000 in the third quarter of 2012. In addition, fewer short sales came through in the most recent quarter with only 67,000 recorded, down 39% from 109,000 a year ago.
From Hope Now’s inception back in 2007, participating firms and groups have managed to usher in 6.71 million loan modifications for troubled borrowers. Of those modifications, approximately 5.4 million were completed by proprietary programs within private financial institutions. Another 1.2 million were completed through the government’s Home Affordable Modification Program (HAMP).
The alliance even saw improvement from the second to third quarter of 2013, with foreclosure starts declining 10% between the two periods, falling from 320,000 to 290,000.
Completed foreclosure sales also tumbled 6%, hitting 167,000 actions in Q3, compared to 158,000 in Q2 2013.
In just the month of September, 53,000 loan modifications were enacted, with 40,000 classified as proprietary loan mods and the remaining 12,884 going through HAMP. Total loan modifications for the month represented a 21% fall from the previous month.
Proprietary loan modifications with fixed interest rates of five or more years accounted for 93% of the total, while those with reduced principal and monthly interest payments accounted for 76% of the loans studied. Those with reduced principal and interest payments of more than 10% accounted for 71% of the total, Hope Now said.
Foreclosure starts also fell month-over-month, declining 6% to 93,000 starts in September — a drop from 99,000 in August.
Meanwhile, foreclosure sales declined 12% between September and August, hitting 51,000 in September 2013.