The inventory of homes awaiting foreclosure continued to grow in February as the number of new foreclosures actually declined, a sign that the recent filed multi-state AG agreement hasn't had any early impact on the backlogged foreclosure inventory.
The agreement was announced in February and filed March 12, but it will take months for the parties to work out new processing standards that will reduce servicers' risk of liability and allow them to speed up processing.
There were virtually the same number of completed foreclosures in February, 65,000, compared to a year ago, and they were actually fewer than the 71,000 in January. Approximately 1.4 million homes, or 3.4 percent of all homes with a mortgage, were in the foreclosure inventory as of February 2012 compared to 1.5 million, or 3.6 percent, in February 2011 and 1.4 million, or 3.4 percent, in January 2012, according to CoreLogic's February Mortgage Report.
Of the 1.6 million properties currently in the shadow inventory, 800,000 units are seriously delinquent (3.1-months' supply), 410,000 are in some stage of foreclosure (1.6-months' supply) and 400,000 are already in REO (1.6-months' supply).
"The pace of completed foreclosures is down slightly compared to January, running at an annualized pace of 670,000, but compares favorably to the pace of completed foreclosures in February a year ago. Even though the pace of completed foreclosures has slowed, the overall foreclosure inventory is decreasing because REO sales were up in February," said Mark Fleming, chief economist for CoreLogic.
As a result, with the spring buying season upon us, the inventory of REOs may decline further as the pace of distressed-asset sales rises along with the rest of the housing market, Fleming said.
"In February, more than 60 major markets saw a decrease in their foreclosure rates compared to a year ago," said Anand Nallathambi, president and CEO of CoreLogic. "This combined with faster REO-clearing rates, better employment news, and continued historically low interest rates are all positive signs of improvement in the housing economy."
The share of borrowers nationally who were 90 or more days late on their mortgage payment fell to 7.3 percent in February 2012 from 7.8 percent in February 2011, but inched up from 7.2 percent in January 2012. At the same time, the inventory of real estate owned (REO) assets held by servicers nationwide grew faster in February 2012 than the pace of REO sales, as measured by the distressed clearing ratio. The distressed clearing ratio is calculated by dividing the number of REO sales by the number of completed foreclosures; the higher the ratio, the faster the pace of REO sales relative to the pace of completed foreclosures. The distressed clearing ratio for February 2012 was 0.73, up from 0.66 in January 2012.
