In May, foreclosure starts outnumbered foreclosure sales by a near 3-1 ratio, according to a report from Lender Processing Services.
Even though foreclosure starts and sales saw similar monthly increases in May, 11.6 percent and 10 percent respectively, the actual number of foreclosure starts was significantly higher than foreclosure sales. Foreclosure starts numbered 202,707 while foreclosure sales totaled 73,439.
Weitz – I’d love to hear from the folks that claim real estate is recovering and get their spin on this. The reality is that we cannot and will not have a sustainable recovery in real estate or otherwise until the distressed real estate situation tempers out. There are still far too many people that owe much more than their homes are worth and I strongly believe that the foreclosures and short sales will be on a drag on pricing for some time.
Also, foreclosure inventory maintained historically high levels at 4.14 percent.
LPS Applied Analytics SVP Herb Blecher said the situation is more nuanced when looking at the breakdown between states that apply judicial versus non-judicial foreclosure processes.
“There’s a stark contrast in foreclosure inventories between judicial and non-judicial states,” said Blecher. “In the former, 6.5 percent of all loans are in some stage of foreclosure – that’s more than 2.5 times the rate in non-judicial states where only 2.5 percent of loans are currently in the foreclosure pipeline.
Blecher added both figures are significantly higher than the pre-crisis average of 0.5 percent, but noted the average yearly decline in non-current loans for judicial states is less than one percent compared to 7.1 percent in non-judicial states.
Unlike non-judicial states, lenders must receive court approval before initiating a foreclosure. This leads to a longer timeline for when foreclosures actually exit the pipeline.
In non-judicial states, foreclosure sales were three times greater than in judicial states, with 6.46 percent of foreclosure inventory making its way out of the foreclosure pipeline in May compared to only 2.14 percent in judicial states. Judicial states also hold a much higher percentage of past due loans that are more than two years old. In judicial states, about 53 percent of loans in foreclosure have been delinquent for more than two year compared to just over 30 percent of loans in non-judicial states.
Weitz – this non-judicial situation is good for Washington, and I will note that the Foreclosure Fairness Act has done a nice job of reducing foreclosures, and slowing down the foreclosure pipeline. That said, it does solve the underlying problem that the foreclosure pipe line still enormous.
At 7.2 percent, delinquencies in May were up slightly by 1.1 percent, but down almost 12 percent a year ago.
LPS uses loan-level residential mortgage data and performance information on nearly 40 million loans for its monthly report.
For more information on your rights in Foreclosure or Short Sale, consider contacting a Seattle Foreclosure Attorney.
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Kirkland, WA 98033