Foreclosure Starts Rise in December and January Signaling Foreclosure Backlog Pipeline Improving

Data through the end of January shows significant movement in both foreclosure starts and sales, and it has some market watchers saying the lull in foreclosure activity seen over the past year-and-a-half may very well be coming to an end.

Lender Processing Services’ (LPS) latest market report says foreclosure starts jumped 28% between December and January, and foreclosure sales soared 29%. “While one month of data does not necessarily indicate a trend, this surge could suggest the backlogged foreclosure pipeline is beginning to move,” LPS said in its report.
The January data also shows that the percentage of repeat foreclosures hit a new all-time high, with 47% of all foreclosure starts during the month involving a mortgage that had been delinquent before, cured, and then fell back into foreclosure again. LPS reports that the biggest pickups in foreclosure activity occurred in states where the foreclosure process is presided over by the courts. The company found that foreclosure starts in judicial states increased almost two times as much as in non-judicial states during the first month of 2012.
The January study shows foreclosure sales in non-judicial states continue to outpace those in judicial states by about three-to-one, but LPS says the surge in foreclosure sales is having a significant impact on pipeline ratios.The company assesses each individual states pipeline ratio as the number of 90-plus day delinquencies and the number of foreclosures divided by the number of foreclosure sales for the month. The ratio for judicial states has been cut from its February 2011 high of 147 months down to 63 months as of January 2012.
LPS says new problem loan rates are still relatively low nationally at 1.4%, but pockets of trouble exist. The top five states for new seriously delinquent loans in January were Nevada, Florida, Mississippi, Arizona, and Georgia. At 7.97 %, the national delinquency rate is down over 25%  from its peak of 10.97%  in January of 2010, according to LPS. However, the industry’s foreclosure inventory – calculated as the percentage of loans in the process of foreclosure that have not yet reached the final stage of foreclosure sale – remains near historic highs.
Foreclosure inventory registered a reading of 4.15% of all active loans as of the end of January. To put that number into perspective, the foreclosure inventory was 0.48% in December 2005. Nationally, LPS says over 40% of loans in foreclosure are more than 2 years past due.
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