The rate at which new loans are showing problems (meaning they now are seriously delinquent after having been current six months ago) have fallen below 1 percent for the first time since 2007, according to the March Mortgage Monitor report released May 6 by mortgage servicing firm Lender Processing Services.
Herb Blecher, applied analytics senior vice president for LPS, said that a borrower’s equity position is still a key indicator of his or her propensity to default.
“There has always been a clear correlation between higher levels of negative equity and new problem loan rates,” Blecher said in a news release. “Looking at the March data, we see that borrowers with equity are actually outperforming the national average — at 0.6 percent, this group is quite close to pre-crisis norms. The further underwater a borrower gets, the higher those problem rates rise. Borrowers with loan-to-value ratios of just 100-110 percent are actually defaulting at more than twice the national average. For those 50 percent or more underwater, we see new problem rates of 4 percent.”
The LPS data revealed that with new problem loans in March coming in at 0.84 percent, the rate is close to pre-crisis levels exhibited in 2004-05 when only 0.55 percent of loans were in some stage of distress.
The report showed that borrowers are more likely to default than mortgage holders with equity, and those with loan-to-value ratios between 100 to 110 percent are defaulting at more than twice the national average, which was 1.9 percent at the end of March.
During the peak of the housing crisis in 2011, 17 million homes were in negative equity. At the end of March, only 9 million loans were in this position, according to the report.
States with the highest percentage of non-current loans, which combine foreclosures and delinquencies as a percentage of active loans, were Florida, Mississippi, Nevada, New Jersey and New York.
States with the lowest percent of non-current loans were Alaska, Montana, North Dakota, South Dakota and Wyoming.
Read the March 2013 Mortgage Monitor report.