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Foreclosure inventory in judicial states three times non-judicial states


While foreclosure inventory levels and delinquency rates are improving nationally, how a state handles the foreclosure process has a strong impact on how those rates are performing locally.


Foreclosure inventory remains volatile

According to the January Mortgage Monitor report by Lender Processing Services (LPS), foreclosure inventory remains volatile, as the national loan delinquency rate drops 2.03 percent in January to a total of 7.03 percent. LPS reveals that the foreclosure inventory in judicial states remains three times that of non-judicial states. LPS Applied Analytics Senior Vice President Herb Blecher said in a statement that even now, this now-familiar judicial/non-judicial dichotomy is not as clearly defined as it once was.

“On average,” Blecher said, “pipeline ratios — the rate at which states are currently working through their existing backlog of loans either in foreclosure or serious delinquency — are almost twice as high in judicial states than non-judicial states. At today’s rate of foreclosure sales, it will take 62 months to clear the inventory in judicial states as compared to 32 months in non-judicial states. A few judicial states — New York and New Jersey in particular — have such extreme backlogs that their problem-loan pipelines would take decades to clear if nothing were to change.”

Blecher continued, “More recently, certain non-judicial states, such as Massachusetts and Nevada, have enacted ‘judicial-like’ legislative and/or legal actions which have greatly extended their pipeline ratios. Nevada’s ‘time to clear’ has extended from 27 months in January 2012 to 57 months as of January 2013. The change in Massachusetts has been even more pronounced. Since June of last year, its pipeline ratio has gone from 75 to 171 months.”

Problem loan rates remain high

The January Mortgage Monitor also unveils that while the overall delinquency rate is improving, new problem loan rates remain high in states with large numbers of “underwater” borrowers.

So-called “sand states,” such as Nevada, Florida and Arizona, are still seeing high levels of negative equity (45, 36 and 24 percent of borrowers are underwater, respectively), and each of those states is experiencing higher-than-average levels of new problem loans. LPS notes, “Additionally — and further underscoring the differences seen between judicial and non-judicial states — new problem loan rates in non-judicial states declined slightly over the last six months, while increasing almost 20 percent in judicial states.”

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