Black Knight Financial Services said today that the rate for mortgage delinquencies of 30 days or more, which does not include loans in foreclosure, rose by a 0.26 percent in December to 6.47 percent. The company's Mortgage Monitor for December and year-end 2013 noted that despite the slight monthly increase the rate fell 9.85 percent from December 2012 to December 2013 bringing delinquencies down to about the same rate as they were in early 2009 and about 1.5 times the historic delinquency rate. There were 3.24 million properties with mortgages delinquent by 30 days or more in December and 1.28 million of those were at least 90 days overdue.
Black Knight is the former Lender Processing Services. LPS was acquired and renamed by Fidelity National Financial on January 2. Fidelity is the nation's largest provider of title insurance through its ownership of Fidelity National Title, Chicago Title, Commonwealth Land Title, and Alamo Title. Fidelity also holds majority interest in American Blue Ribbon Holdings, owner and operator of several restaurant companies including O'Charley's, Ninety Nine, Village Inn and Max & Erma's and has the controlling stake in Remy International, a designer, manufacturer, remanufacturer, marketer and distributor of aftermarket and original equipment electrical components for automobiles, light trucks, heavy-duty trucks and other vehicles.
The foreclosure pre-sale inventory (loans for which the formal foreclosure process has been initiated), fell 27.9 percent from the previous December and is at a current rate of 2.48 percent. This is still more than four-and-a-half times the "normal" foreclosure rate but at the peak the rate was more than eight times the historic norm. The month-over-month decline was 0.74 percent. A total of 1.24 million properties are in that inventory. Foreclosure starts were down 23 percent from levels a year earlier. Black Knight said that properties in foreclosure have been delinquent for an average of 920 days.
"In many ways, 2013 marked an abatement to crisis conditions in the U.S. mortgage market," said Herb Blecher, senior vice president of Black Knight Financial Services' Data & Analytics division. "Delinquencies neared pre-crisis levels, foreclosure inventory declined 30 percent over the year, new problem loan rates improved in both judicial and non-judicial foreclosure states, and foreclosure starts ended the year at the lowest level since April 2007. Despite a recent drop off, 2013 was also the best year for property sales since 2007, with totals through November outnumbering the full year totals for each of the prior three years. In addition, as we've noted before, due to stricter underwriting, 2013 originations have proven to be the best-performing loans on record.
At the same time, Blecher noted that mortgage originations fell to the lowest levels since 2008 as higher interest rates seemed to have ended the refinancing wave of the last several years. Even as rates pulled back again toward the end of the year refinancing remained low. He said that going forward opportunities for new originations will likely come from looser underwriting and/or home equity lending which has shown a sizable increase in volume since 2012.
Black Knight notes that underwriting criteria remains very strict although most originators eased off a little in 2013. "Looser" standards are primarily focused on the refinancing population where average credit scores have steadily declined and loan-to-value ratios ratcheted up.
Home sales in 2013 were the strongest since 2007. National home prices also continued to improve but home values in states where a non-judicial foreclosure process is the norm are recovering faster than in judicial states. Of course as prices are rising faster the level of negative equity is also shrinking more rapidly in non-judicial states.
"On the home price front, while national levels rose 8.5 percent year-over-year through November 2013, we did see home prices in judicial states generally recovering at a slower pace than their non-judicial counterparts," Blecher said. "A similar situation existed with regard to negative equity improvement, which also occurred more slowly in those areas with extended foreclosure processes. With 75 percent of loans that are either seriously delinquent or in foreclosure being 'underwater,' the resolution of these inventories in many regions (and the speed at which that has occurred) has had a pronounced effect on reducing overall negative equity numbers." New problem loan rates also occurred with greater frequency in judicial states.
The December 2013 data also showed that, even in most states with judicial or legislative slow-downs, foreclosure pipelines have been clearing over the last half of 2013. Massachusetts, for example, has seen its pipeline ratio decline by 49 percent since June, while New York and New Jersey have come down 39 and 37 percent, respectively. On the other hand, California - which enacted its Homeowner Bill of Rights at the start of 2013 - has seen its pipeline ratio increase by 36 percent in the last six months. Overall, judicial states' foreclosure inventories remain 3.5 times as large as those in non-judicial states.
