The nation’s inventory of loans in foreclosure is disproportionately distributed in states with judicial foreclosure processes, according to the latest foreclosure report from Black Knight Financial Services.
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. “Nationally, the foreclosure inventory rate has declined for 26 straight months, and is currently at its lowest point since April 2008, but this can obscure the stark difference that remains between judicial and non-judicial states,” said Gradushy. Although judicial states account for about 42% of all active mortgages, some 70% of loans in foreclosure are in these states.
Today, the share of loans in foreclosure in judicial states is 3.23% – a significant decline from its January 2012 high of 6.6%, but still more than four times higher than the pre-crisis ‘norm.’
Further, more than 60% of the foreclosure inventory in judicial states has been past due for two years or more. In fact, these loans have been delinquent an average of 1,084 days, as compared to 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.
“We also looked at loan modifications and found that overall activity is down, with an average of just 45,000 modifications monthly so far this year. However, the share of Home Affordable Modification Program modifications has increased over the last five months. In May, HAMP accounted for over 60% of modifications, and for approximately 50% of all modifications so far this year. The data also showed that all vintages of HAMP modifications are performing significantly better in terms of re-default rates than proprietary modifications (those negotiated by the lender outside of HAMP) overall, as well as for modifications with reduced payments for the borrower. In most cases, proprietary modifications were almost twice as likely to re-default six months after modification than HAMP-modified loans.”
Here are some highlights from the full report:
- Foreclosure inventory is 3.5X higher in judicial states than non-judicial, and more than 60% of these loans have been past due for two years or more
- Loans in foreclosure in judicial states have been delinquent an average of 1,084 days (compared to just 775 days in non-judicial states)
- The top 4 states with the longest average delinquency for loans in foreclosure are also all judicial states: New York (1,350 days), Hawaii (1,315), New Jersey (1,276) and Florida (1,246) Massachusetts, a non-judicial state that has enacted some very "judicial-like" procedures, is a close 5th at 1,148 days
- The share of HAMP mods has increased over the last five months, and in terms of re-defaults, HAMP mods are performing better (sometimes twice as much so) than proprietary mods structured by lenders outside of HAMP
- The month's data also showed an expected seasonal increase in mortgage originations, although refinances represented just 35% of originations, the lowest share since 2008
Finally, Black Knight found home sales volume rebounding as expected due to seasonal effects. Distressed sales (REO or short sale) continue to decline overall, while 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% of all distressed sales at the end of 2012, short sales now make up fewer than 34% of non-traditional transactions. While short sale discounts are shrinking, those on REO properties remain stable at around 25%.