Foreclosure starts jumped nearly 10% in January compared to December to reach the highest level in 12 months, according to Black Knight Financial Services.
However, the firm's January Mortgage Monitor report finds that more than half of the foreclosure starts that month were repeats, as opposed to first-time foreclosure starts. More specifically, repeat foreclosure starts (meaning the homeowner came out of foreclosure but went back into it) were up 11%, month over month, while first time foreclosure starts were up only 0.33%.
In the report, Trey Barnes, senior vice president of loan data products for Black Knight, notes that the increase in foreclosure starts in December was mostly in the judicial states, where foreclosures tend to take longer to process. He says foreclosure starts jumped about 10% in the judicial states in December, as compared to 1.7% in non-judicial states.
‘Judicial states are also seeing higher levels of both new problem loans and serious delinquencies than non-judicial states, although volumes are down overall in both categories,’ Barnes says.
Meanwhile, ‘foreclosure sale counts – essentially, completed foreclosures – have been decreasing more rapidly than the inventory of seriously delinquent loans in both judicial and non-judicial states,’ Barnes says.
‘As a result, foreclosure pipeline ratios, the backlog in months of foreclosure and 90-day delinquent inventory based on current foreclosure sale rates, have been increasing across the board,’ he says. ‘In judicial states, the pipeline ratio now stands at 58 months; up quite a bit from the 47 months seen in 2013, but a far cry from its high of 118 months a couple of years before that.’
Barnes also notes that in recent months, ‘non-judicial pipeline ratios have reached similar levels to judicial pipeline ratios.’
‘As of January, the non-judicial pipeline ratio was at 53 months, close to an all-time high,’ he says. ‘Throughout the housing crisis, non-judicial pipeline ratios were significantly lower than those in judicial states.’
Black Knight's January Mortgage Monitor also includes a section analyzing the impact of the Consumer Financial Protection Bureau's (CFPB) new mortgage servicing rules prohibiting the practice of dual tracking – which is when servicers pursue foreclosure while at the same time offering distressed borrowers loan modifications and other foreclosure alternatives. The report finds that these new rules increased the average amount of time that a borrower is delinquent from 6.5 months to 14.6 months. This is partly a function of new rules that prohibit servicers from starting the foreclosure process on loans less than 120 days delinquent.
As of January, first-time foreclosure starts were occurring at an average of 9.1 months delinquent, the report finds.
Black Knight also revisited the subject of home affordability (calculated as the ratio of a fixed-rate mortgage payment on the median home price to the median monthly household income) and found that – despite two years of home price increases at the national level – affordability is better now than it was in the years prior to the housing bubble, due primarily to the current low interest rate environment.
As of January, about 5.56% of all properties with a mortgage were delinquent, down 1.41% compared to December.
The total U.S. foreclosure presale inventory rate was about 1.61%, down 0.20% compared to December.
States with highest percentage of non-current loans in January were Mississippi, New Jersey, Louisiana, New York and Maine.
States with the lowest percentage of non-current loans were Montana, Arkansas, South Dakota, Colorado and North Dakota.
States with highest percentage of seriously delinquent (120-plus days past due) loans were Mississippi, Rhode Island, Louisiana, Alabama and Maine.