Foreclosure backlogs soar in judicial states

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The May Mortgage Monitor report released by Lender Processing Services shows that the nation’s foreclosure inventory remains near all-time highs, with 4.12 percent of all active mortgages in the foreclosure pipeline in addition to the 3.2 percent that are 90 days or more delinquent but have not yet begun the foreclosure process.

However there’s a stark contrast in foreclosure inventories between judicial and non-judicial states, explained LPS Applied Analytics Senior Vice President Herb Blecher.

“In the former, 6.5 percent of all loans are in some stage of foreclosure--that’s more than 2.5 times the rate in non-judicial states where only 2.5 percent of loans are currently in the foreclosure pipeline. Both these figures are significantly higher than the pre-crisis average of 0.5 percent, but it is worth noting that the average year-over-year decline in non-current loans for judicial states is less than one percent, whereas in non-judicial states, it’s down 7.1 percent.”

The difference between judicial and non-judicial states impacts the length of time loans remain in the foreclosure pipeline as well; the percent of aged foreclosure inventory has increased notably in judicial states.

Approximately 53 percent of loans in foreclosure in states that follow a judicial foreclosure process have been delinquent for more than two years, as compared to just over 30 percent of loans in non-judicial states.

Connecticut, Delaware, Florida, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Nebraska, New Jersey, New Mexico, New York, North Dakota, Ohio, Pennsylvania, South Carolina, Vermont are the states requiring judicial review.

Nationwide, foreclosure sales - which mark the end of the foreclosure process - were up 10 percent in May with the increase more pronounced in non-judicial states. In those states, 6.46 percent of the existing foreclosure inventory progressed to foreclosure sale in May, as compared to just 2.14 percent of the inventory in judicial states.

The May data also shows that after a sharp seasonal decline, delinquencies stabilized, up just 1.1 percent for the month to 7.2 percent, but still down almost 12 percent year to date. In addition, new problem loan rates continue to improve, with rates dropping for the eighth consecutive month--reaching a point (1.06 percent) not seen since July 2007, and well off their January 2009 peak of 2.92 percent.

Finally, foreclosure starts were up for the month, rising 11.6 percent from April, though still low by historical standards and more than 40 percent off their September 2010 peak.

Other key results reported in LPS’ First Look release, other key results from LPS’ latest Mortgage Monitor report include:

Total U.S. loan delinquency rate: 7.2 %
Month-over-month change in delinquency rate: 1.1 %
Total U.S. foreclosure pre-sale inventory rate: 4.12 %
Month-over-month change in foreclosure pre-sale inventory rate: -0.5 %
States with highest percentage of non-current* loans: FL, MS, NJ, NV, IL
States with the lowest percentage of non-current* loans: MT, AK, SD, WY, ND