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LPS: mortgage delinquencies see largest monthly increase in five years

As the total loan delinquency rate is at 7.4 in its most current reading, the most recent month reported one of the highest spikes seen in many years.

Housing continues to show mixed signals

On the heels of the National Association of Realtors’ third quarter report indicating that home prices are seeing accelerating improvement, the Lender Processing Services (LPS) September Mortgage Monitor sends a mixed signal about housing, reporting that between August and September, mortgage delinquencies rose 7.7 percent, the largest monthly increase seen since 2008.

LPS argues that September is typically when we see a rise in delinquencies, but says this indicator was “still a marked upturn,” and that the data must be looked at in context.

LPS Applied Analytics Senior Vice President Herb Blecher said, “September’s increase in the delinquency rate was indeed significant, but the overall trend is still one of improvement. Despite the monthly jump, delinquencies are down 30 percent from their January 2010 peak, and our analysis revealed some interesting factors related to the spike. Of course, one month’s data does not indicate a trend. We will be monitoring these factors over the coming months to see how the situation develops.”

LPS points out other indicators that also dipped

Blecher continued, “September 2012 was notable in its short duration of business days and virtually all transactional or operational metrics we observed declined in volume for the month; foreclosure starts, foreclosure sales, delinquent cures and loan prepayments all dropped from their August levels. It is important to note that we also saw the percentage of re-defaulting modifications contributing to the delinquency rate actually declined from the month prior.”

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Florida, Mississippi, New Jersey, Nevada, and Louisiana have the highest percentage of non-current mortgages, while Montana, Alaska, South Dakota, Wyoming, and North Dakota continue to have the lowest percentage.

Finding the balance to begin a real recovery

Dr. Lawrence Yun, NAR’s Chief Economist, said in a statement regarding home prices, “Housing inventories have been gradually trending down from a record set in the summer of 2007. Earlier this year, a broad equilibrium began to develop in most areas between home buyers and sellers, which led to a sustained upturn in home prices. We expect fairly normal appreciation patterns in 2013, but there is a risk of price acceleration if builders are unable to increase supply to meet the needs of our growing population and household formation.”

As housing finds its bottom, the intersection between home prices and delinquencies becomes more important, as a healthy balance must be found before a true recovery can take place in the housing sector.

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Tara Steele is the News Director at The American Genius, covering entrepreneur, real estate, technology news and everything in between. If you'd like to reach Tara with a question, comment, press release or hot news tip, simply click the link below.

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