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Mortgage delinquencies see biggest year-to-date drop since 2002

New loans can roll in all day, but if mortgage delinquencies accompany them, housing doesn’t see gains. Fortunately, a new LPS study reveals that delinquency rates are improving dramatically in 2013.

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Largest annual drop in mortgage delinquencies in 11 years

According to the May Mortgage Monitor report by Lender Processing Services (LPS), the national mortgage delinquency rate has improved over 15 percent in 2013 alone, landing at 6.08 percent for the month of May, down 2.11 percent from April. LPS also indicates that this is the biggest year-to-date drop in 11 years. The total foreclosure presale inventory rate fell 3.91 percent in May to 3.05 percent.

LPS Applied Analytics Senior Vice President Herb Blecher explained that much of this improvement is supported by the fact that new problem loan rates are approaching the pre-crisis average. “Though they are still approximately 1.4 times what they were, on average, during the 1995 to 2005 period, delinquencies have come down significantly from their January 2010 peak.”

Fewer problem loans coming into the system

Blecher continued, “In large part, this is due to the continuing decline in new problem loans — as fewer problem loans are coming into the system, the existing inventories are working their way through the pipeline. New problem loan rates are now at just 0.73 percent, which is right about on par with the annual averages during 2005 and 2006, and extremely close to the 0.55 percent average for the 2000-2004 period preceding.”

Loan origination activity remained “strong” through April, with new loans increasing 1.8 percent from march and 34.1 percent annually. May’s numbers indicate an increase in prepayment rates, “indicating that refinance activity, and likely associated originations, remained strong despite that month’s increased interest rates.”

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Negative equity continues to be problematic

“As we’ve noted before,” Blecher stated, “negative equity appears to still be one of the strongest drivers of new problem loans, and — primarily buoyed by home price increases nationwide — that situation also continues to improve. We looked once again at the number of ‘underwater’ loans in the U.S., and found that the total share of mortgages with LTVs of greater than 100 percent had declined to just 7.3 million loans as of the end of the first quarter of 2013. This accounts for less than 15 percent of all currently active loans and represents a nearly 50 percent year-over-year decline.”

Regional performance varied

The states with the highest percentage of non-current loans are Florida, New Jersey, Mississippi, Nevada, and New York.

The states with the lowest percentage of non-current loans are Montana, Alaska, Wyoming, South Dakota, and North Dakota.

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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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