Lender Processing Services (LPS) reported a spike in cure rates in February.
About 500,000 loans were cured, or went from being delinquent to current, in February, with most of the cures reported on loans that were just one or two months past due, according to LPS’ February Mortgage Monitor report.
The increase in cures, however, is typical in February and March, LPS noted.
“What stood out in this month’s data was where that increase was centered,” explained Herb Blecher, SVP of applied analytics at LPS. “February’s rise in cures was driven almost entirely by FHA loans, representing a 29 percent increase from January, and likely driven by revived modification activity related to the revisions to the FHA’s Loss Mitigation Home Retention options released late last year.”
LPS also found an increase in modifications over the last two quarters after two years of decline.
“The majority of the increases in both Q3 and Q4 occurred in proprietary modifications as opposed to through the Home Affordable Modification Program. Given the currentFHA activity, along with the FHFA’s recent announcement of its Streamlined Modification Initiative, we could see continued strength in modification volumes in the future,” Blecher added.
Overall, LPS reported delinquency data shows the rate of non-current loans, which include delinquencies and in foreclosures, trended downward in February, but the rate still remains nearly two times higher than pre-crisis levels.
For example, in February, the rate of non-current loans stood at 10.18 percent, down from the January 2010 peak of 14.82 percent, but well above 5.15 percent-the rate seen in December 2005.
Serious delinquencies, or loans that are 90 days past due, are still experiencing improvements, but at a slower pace, while inventory continues to age, according to LPS. In January 2010, when 90-plus delinquencies peaked, there were 2.9 million loans that were seriously delinquent. On average, the loans were 252 days past due. As of February, about 1.5 million loans were seriously delinquent, but were past due by 474 days on average.
Compared to January 2010, delinquencies declined across all products types, but for FHA/VA loans, foreclosures actually increased since that time by 16 percent. While recent vintages are performing better due to stricter underwriting guidelines, LPS explained FHA is supporting lower quality borrowers with higher default rates.
by Esther Cho