Foreclosure inventory continues to decline but remains more than eight times what it was in the decade prior to the housing crisis, according to the latest report from Lender Processing Services (LPS).
Noncurrent loans make up 10.9 percent of all loans as of August, demonstrating a year-over-year change of -7.6 percent, according to LPS. As of August, the delinquency rate stands at 6.9 percent, and the foreclosure rate is 4.0 percent. There remains a large gap in the foreclosure rate between judicial states and non-judicial states. In fact, in judicial states the rate remains near an all-time high of 6.49 percent, while the foreclosure rate in non-judicial states is 2.28 percent.
The amount of loans 90 or more days delinquent is near half of its January 2010 peak. The majority of these loans are more than nine months delinquent. About 43 percent are at least 12 months delinquent. The overall delinquency rate declined 2.3 percent in August.
States ranking highest for non-current loans include Florida, Mississippi, New Jersey, Nevada, and New York. States with the lowest percentages of non-current loans include Montana, Alaska, South Dakota, Wyoming, and North Dakota.
LPS noted prepayment activity was up "significantly" in August, nearing levels last reported in 2005. The annualized prepayment rate at the end of August was almost 25 percent, according to LPS’ findings. Prepayment was highest among loans with higher combined loan-to-value ratios (CLTVs).
For example, among loans with more than 120 percent CLTV, prepayment increased more than 65 percent year to date. According to LPS, this trend is significant because prepayments are an indicator of refinance activity. In August, 2011 vintage loans experienced a 23 percent increase in prepayments over the month. Loans with vintages from 2007 and earlier experienced a prepayment increase of just 9 percent, which LPS interprets as signs of a "refi burn out."
"[I]t is also becoming evident that loans originated in 2007 and earlier have diminished prospects for conventional refinancing opportunities," stated Herb Blecher, SVP of applied analytics at LPS. "Fewer than 30 percent of these vintages remain both active and current, and on average, they are marked by larger negative equity positions and lower credit scores," Blecher explained.