Here's Why Mortgage Delinquencies Are Still A Big And Growing Problem

LPS February Mortgage

Photo: LPS

Even as home prices tentatively rise, the gorilla in the room is growth in delinquent loans.Delinquent loans are up for several reasons. Obama is doing everything he can to prevent foreclosures, which means more mortgages languish in delinquency. More Americans are poorer than ever, and are unable to pay the mortgage. Others have caught the default contagion and may be flirting the idea of a strategic default.

What happens if delinquent loans become foreclosures and flood the market is a severe drop in home prices.

The evidence is in the latest Mortgage Monitor from LPS.

See the evidence here >

February delinquencies were up 21.3% from last year

Source: LPS

Foreclosure inventory is up 51.1% from last year

Source: LPS

Inventory is bloated with non-current loans

Source: LPS

Red dot means a major foreclosure problem

Source: LPS

Red dot means a major foreclosure and/or delinquent loan problem

Source: LPS

Loans are going bad at record rates

Source: LPS

1,145,000 loans went bad from Jan. to Feb.

Source: LPS

Nevada and Mississippi are at the heart of the delinquent mortgage spike

Source: LPS

Foreclosed homes are not selling

Source: LPS

Although FHA production declining...

Source: LPS

And although FHA origination attributes have improved...

Source: LPS

FHA loans are still going bad at rising rates

Source: LPS

Even at moderate credit scores

Source: LPS

Even at good credit scores

Source: LPS

2008 FHA loans are going bad as quickly as other high risk products

Source: LPS

An unprecedented volume of FHA loans are in advanced delinquency

Source: LPS

But it's not all bad news

While delinquent loans present a huge risk, other aspects of the housing market are getting better.

Better loan practices will decrease the number of new delinquencies. A strong-enough recovery in prices could salvage underwater mortgages, removing the incentive to default.

February is a clear improvement

Source: LPS

Delinquent loans are improving at record rates

Source: LPS

HAMP is helping

Source: LPS

Although more loans deteriorated than improved...

Source: LPS

The ratio of deteriorating-to-improving loans is improving

Source: LPS

Roll rate into foreclosure is down (thanks to high number of delinquent loans)

Source: LPS

Recent deterioration rate (red) is bad... but things have been worse (grey)

Source: LPS

Banks have become slower to foreclose on delinquent loans

Source: LPS

Jumbo loans are in decline

Source: LPS

Jumbo loan standards have improved

Source: LPS

Almost all jumbo loans have solid credit scores

Source: LPS

First payment default rates for all loans are down

Source: LPS

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