Although residential delinquencies and foreclosures are starting to ebb, “new” problem loans are closely tied to negative equity, according to a report from Lender Processing Services, Jacksonville, Fla.
Nationally, 18% of borrowers who are current on their loan payments are underwater, ranging from a low of 0.4% in Wyoming to 55% in Nevada, the firm said.
The firm’s July ‘Mortgage Monitor’ shows that national foreclosure inventories remain stable – but near historic highs -- while delinquencies have dropped 30% since their peak in January 2010.
At the end of July, mortgage delinquencies totaled 7.03%, a 1.6% sequential decline. The U.S. foreclosure inventory (pre-sale) fell to 4.08%, a slight decline from June.
Delinquencies tracked by LPS are slightly lower than the national delinquency rate reported by the Mortgage Bankers Association. At June 30,
"The July mortgage performance data shows a continuing correlation between negative equity and new problem loans," explained Herb Blecher, senior vice president, LPS Applied Analytics. "As negative equity increases, we see corresponding increases in the number of new problem loans. In Nevada and Florida, two of the states with the highest percentage of underwater borrowers, more than three percent of borrowers who were up to date on their payments are 60 or more days delinquent six months later. This suggests that further home price declines - should they occur - could jeopardize recent improvements."
