The National Mortgage Settlement and provisions it outlined for mortgage servicers may have accounted for a steep 21.9% drop in foreclosure starts in October, according to Lender Processing Services' Mortgage Monitor.
Year-over-year, October's foreclosure starts were even lower, down 47.8% from the same month in 2011.
While it may be tempting to attribute the drop in starts to an improving housing market, LPS warns not to jump to conclusions about the decline in foreclosure starts.
The data firm attributes the steep drop to servicing changes outlined by the $25 billion mortgage-servicing settlement that took effect around the month of September. One of those changes was a requirement that servicers give borrowers a 14-day notice in writing before referring a loan to foreclosure. Those letters were first mailed in September and the steep drop in foreclosure starts came soon after, according to LPS.
With that in mind, LPS suggests the quick drop in foreclosure starts may be a temporary trend that is subject to change.
At the same time, prices are going up nationwide, with prices up 3.6% year-over-year in September and on track to gain 5% to 7% this year alone.
Still, the housing market is far from recovery, LPS points out. In fact, by the firm's own estimations, the market is now churning sales at half the pace established during the peak of the housing market.
There have been about 4.1 million sales over the past 12 months, compared to 8.2 million in the fall of 2005, LPS said. Furthermore, about a third of the sales in the past 12 months, approximately 1.3 million, were considered distressed. That is well above the 226,000 sales recorded in 2005. And prices, while improving, are still 23% below peak levels, according to LPS.
But LPS sees its latest mortgage monitor as somewhat of a mixed bag, with prepayment rates showing a possible rise in October originations and mortgage bond spreads performing better.
The percentage of delinquent mortgages in the U.S. hit 7.03% in October. The states with the highest percentage of non-current loans include Florida, Mississippi, New Jersey, Nevada and New York.
Those with the lowest percentage of non-current loans were Montana, Wyoming, South Dakota, Alaska and North Dakota.