What does it say for the state of the upended mortgage industry that Standard & Poor's can report the positive news that there is now only 47 months of shadow inventory on hand? Remember, shadow inventory is seriously delinquent or foreclosed real estate that has not yet even been listed for sale—mostly because of the glut of foreclosed properties already in the market.
That's four more years of pain, on top of however long it takes to dispose of current inventory. Granted, this isn't a linear estimate, and changing conditions could bring that timeline down. But it's clear that the foreclosure overhang will not be resolved soon, and that a normal mortgage market (whatever that is) is still years away.
The MBA's latest quarterly delinquency survey supports either thesis that could be put forth. Delinquencies overall rose by 12 basis points, while the foreclosure starts rate was down, also by 12 basis points.
Starting with the worst of the worst, subprime mortgages, the good news is that while delinquencies and foreclosures are increasing, they are increasing slowly, at 33 bps for delinquencies (24.33%) and 20 bps for foreclosure inventory (14.89%). It is truly a troubling thing to think mortgage lenders could blithely make hundreds of billions of dollars on loans where the overdue plus foreclosure rate is approaching 40%. (A year ago, it actually edged above 40%, so this may be progress.)
Subprime adjustable mortgages are even higher, with more than 42% of 1.4 million loans overdue or in foreclosure.
In some states, subprime ARMs have passed 50% seriously delinquent. One of them is Florida, no surprise, but the other two are interesting—New York and New Jersey.
There are some states doing much better than others. In North Dakota, for instance, where there's a little oil boom going on, just 2.08% of prime loans were overdue. Alaska was a touch behind it, at 2.76%.
For all loans, North Dakota takes top spot again with 3.22% total overdue. Its neighbor, South Dakota, clocks in at 3.87%.
States with the biggest challenges include Georgia, Alabama and Nevada, each of which is above 10% in total overdues. Mississippi is the state with the most, at 12.86%.
Now, imagine what will happen if the general economy goes into a double-dip recession. That will foul things up even more.
Good advice would be to fasten your belts, because it's going to be a bumpy ride for quite some time.
