Industry Data Open Way to Relative Optimism

The multitude of market data and outlooks is encouraging a few relatively optimistic outlooks into the future of the housing market.

Chicago’s TransUnion presented a relatively optimistic forecast based on the economic assumption that both real estate values and the employment rate will “improve gradually.”

TransUnion vice president of financial services business, FJ Guarrera, expects the national 60-day mortgage delinquency rate “will likely continue to drift downward for the remainder of the year,” at about 6.2%, unless “unanticipated shocks to the economy” will further slow down the housing market recovery.
TransUnion's 3Q10 analysis of mortgage trends shows the ratio of borrowers 60 or more days past due “decreased again” to 6.44%, marking the largest quarterly decline since the fourth quarter of 2006. Plus, the quarter-over-quarter mortgage delinquency rate dropped double the percentage amount reported in the first and second quarters of 2010.

“Further positive news” was found in the ratio of borrowers 90 or 120 or more days past due “as both showed larger decreases than in any quarter this year.”
Local housing price changes will continue to determine whether more positive news will be on the horizon.

According to the TransUnion 3Q10 Real Estate Inquiry Index that monitors consumers seeking real estate-related loans, the recovery will follow certain persisting regional patterns.

For example, “although real estate credit activity is depressed across the country,” South Dakota and North Dakota have a relatively high score of 154.28 and 102.77 due to population growth, low mortgage delinquency rates and house price stability. Similarly, low housing prices predominated performance in the lowest-performing states including Alabama where the REI Index was at 12.78, Nevada at 14.47 and Colorado at 14.71.

By the end of 2010 TransUnion anticipates North Dakota will continue to exhibit the lowest yearend mortgage delinquency rate of 1.4% while Florida will retain the highest mortgage delinquency rate at about 14.5%.

Year-to-year statistics show the index increased by 50% or more in the best-performing markets: South Dakota, North Dakota and Massachusetts, but declined by at least 40% in the worst-performing states of Alabama, Wyoming and South Carolina.

Guarrera says both positive and negative variables coming into play, such as the REO inventory, ARM resets, and a stubborn unemployment rate “might quickly abate” the aforementioned positive three-quarter trend.

And “a big drop” in foreclosure sales activity in October following foreclosure suspension announcements lead by Ally (GMAC), PNC and Bank of America is one variable that is more technical than substantial, which is why foreclosure filings were less impacted by the announced suspensions.

The main reason, according to ForeclosureRadar’s October report which provides national foreclosure data down to the ZIP-code level based on monitoring of foreclosure sales at the time of the foreclosure auction—compared to tracking trustee’s deeds that are filed weeks later—is a combination of moratorium calls and slight declines by other lenders that “would have likely led to a drop in October’s foreclosure sales regardless.”

The number of notices of default filings also dropped in October even though the impact of announced suspensions on these filings was limited.

While predictions may vary, ForeclosureRadar.com founder and CEO, Sean O’Toole, expects their impact on foreclosure sales to be in the short term, rather than in the long term. “The latest foreclosure scandal will likely lead to little more than a new scam perpetrated on those who have already lost their home,” he says.

O’Toole sees a parallel between the current situation and what happened with “the cottage industry of loan modification consultants that took upfront fees and provided little in return.” The robo-signing scandal has opened the way to “consultants promising to overturn foreclosure sales,” even when they do not have the required experience to go through the process and regardless of the borrower’s situation.

While Ally restarted foreclosures a week later, neither Bank of America nor PNC had not resumed foreclosure sales as of Nov. 15. ForeclosureRadar reports that B of A filings dropped slightly just after their announcement, but began picking up the following week. PNC appears to have largely stopped new filings, which typically represent less than 2% of filings, “so their impact was minimal.”

The Mortgage Bankers Association’s 3Q10 national delinquency findings also indicate the foreclosure paperwork issues and the decision of several large servicers to halt foreclosure sales temporarily will be minimal.

The MBA highlighted there is a notable difference in loan performance between the judicial and nonjudicial states as the foreclosure inventory rate tends to increase almost twice in states where a court is not involved. As a result the effect of the foreclosure pause will be seen in the fourth quarter of this year and first quarter of 2011 when higher foreclosure inventory numbers will include these loans from the point of the foreclosure referral to exit from the foreclosure process either through a modification, short sale, deed-in-lieu, or a foreclosure sale.

The report states that these foreclosed homes “likely to come on the market in the medium term” do not represent “a change in the underlying economics.”

The better news, MBA’s director of single-family statistics, Joel Kahn, said during a press conference, lay in the fact that even though gains are still marginal, roughly 86% of loans surveyed by the MBA that represent 88% of all loans outstanding are current.