The historical seasonal increase in cure rates occurred again in February, with this year’s uptick driven almost entirely by FHA/GNMA loans.
According to the Lender Processing Services Mortgage Monitor report, approximately 500,000 loans cured in February alone. A loan “cure” rate is when a loan was delinquent in the prior month and is now current.
The Jacksonville, Fla.-based analytic firm said the majority of cures were on loans one-to-two months delinquent, which is typical. As of February,
However, there was surprising data from this month’s mortgage monitor report. LPS revealed rises also seen in loans three to five months delinquent and foreclosure-initiated categories were unexpected.
“What stood out this in this month’s data was where that increase was centered. February’s rise in cures was driven almost entirely by FHA loans, representing a 29% increase from January, and likely driven by revived modification activity related to the revisions to the FHA’s Loss Mitigation Home Retention options released last year,” said Herb Blecher, senior vice president of applied analytics at Lender Processing Services.
Additional data from the report show that after two years of steady declines, modification volume increased substantially over the last six months with about 280,000 loans reworked during that time.
Blecher said the majority of the increases in both the third and fourth quarters happened in proprietary modifications as opposed to the Home Affordable Modification Program.
“Given the current FHA activity, along with the FHFA’s recent announcement of its
Lastly, the report showed that more restrictive underwriting guidelines have led to extremely low default rates relative to “bubble” vintages and a decline in prepayment rates, which is a good indicator of refinance activity. But even though monthly prepayment rates dropped by nearly 10% in February, they are still very high by recent historical standards, LPS noted.
