U.S. homes in foreclosure fell significantly in the latter part of 2012 as the influence of the national foreclosure settlement took hold, delaying the overall pace of foreclosures.
The percentage of U.S. homes in the national foreclosure inventory fell to 3.51% in November, a 2.84% drop from October and a 10% decline from September, mortgage analytics firm Lender Processing Services said Monday.
LPS believes the sharp two-month drop between September and November reflects the impact of servicing requirements from the National Mortgage Settlement taking hold and delaying foreclosure starts.
However, the research firm is careful to note foreclosure starts could "rebound as mortgage servicers incorporate new procedural requirements into their operations."
The U.S. loan delinquency rate increased 1.2% from October to 7.12% in November. Several judicial foreclosure states, which carry longer default timelines, continue to be among those with the highest percentage of non-current loans, including Florida, New Jersey and New York.
Still, a housing rebound is underway with mortgage origination picking up on low interest rates and opportunities opening up to refinance into programs such as the Home Affordable Refinance Program.
"Comparing interest rates on new versus paid-off loans, we see that interest rates on the former are 1.5 percentage points below the latter," said Herb Blecher, senior vice president of LPS Applied Analytics.
"With prepayment activity being as high as it is — 2 percent of total outstanding U.S. mortgage balances prepaid or refinanced in November alone — this equates to significant potential savings for borrowers. On average, this translates into new loan payments that are approximately $190 less per month than those of borrowers prior to paying off their loans."
Blecher sees room for more HARP-refinancing activity with 2.6 million mortgages currently qualified to fit within HARP eligibility requirements. About 50% of those have prime credit scores of 720 or above.
The impact of Hurricane Sandy in the Northeast — a hurricane downgraded to a tropical storm by landfall — is beginning to show in the data. Mortgage delinquencies grew sharply in areas impacted by Sandy, based on the latest LPS data.
"Whereas the national delinquency rate has increased 3.7% since August of this year, delinquencies in Sandy-impacted ZIPs have risen at more than threefold that pace - climbing 15.4% in Conn., 15.2% in N.J. and 14.8% in N.Y," LPS wrote.