(Read More: Map: Tracking the US Real Estate Recovery)

The settlement’s monitor, former North Carolina Banking Commissioner Joseph A. Smith noted, “a significant increase,” in consumer complaints in the second half of 2012.

In a February 2013 report he reported 5,700 consumer complaints submitted to his office, about half of which related to problems with loan modifications or customer service.

The banks have extended close to $46 billion in gross relief to more than 550,000 borrowers under the settlement so far, according to the Office of Mortgage Settlement Oversight. Thousands of borrowers have had their mortgage principal slashed under the settlement, which should reduce future delinquencies. Negative equity is a primary driver of new delinquencies, a fact all too clear in a new report Monday from Lender Processing Services.

“Looking at the March data, we see that borrowers with equity are actually outperforming the national average—at 0.6 percent, this group is quite close to pre-crisis norms,” said Herb Blecher of LPS Applied Analytics, which released the delinquency report Monday.

(Read More: Housing Recovery Shows Up In Job Gains)

“The further underwater a borrower gets, the higher those problem rates rise. Borrowers with loan-to-value (LTV) ratios of just 100-110 percent are actually defaulting at more than twice the national average. For those 50 percent or more underwater, we see new problem rates of 4 percent.”

Article source: http://www.cnbc.com/id/100710946

“I do think some of these delinquent properties will still end up as foreclosures down the road,” notes Blomquist. “But this type of legislation is also forcing lenders to consider other creative ways of disposing of the delinquencies that may not be as difficult as foreclosure has become.”

That includes short sales, deeds in lieu of foreclosure and a growing trend of selling off bad loans to investors. The investors, since they are buying at a deep discount, are able to offer more drastic modifications to keep borrowers in their homes.

(Read More: Americans Are UsingTheir Houses as ATMs Again)

Short sales, when the property is sold for less than the mortgage, are becoming ever more frequent. Nearly 26 percent of Southern California home sales in January were short sales, according to DataQuick, while just 15 percent were foreclosure sales. Investor and cash buying was at or near record levels.

“A lot of today’s housing demand is fueled not by spectacular job growth and soaring consumer confidence, but by super-low mortgage rates and unusually high levels of investor and cash purchases. Take away any one of those elements and it will matter,” said John Walsh, DataQuick president.

With legal changes in California, Florida now has the dubious distinction of having the most properties with foreclosure filings in the nation. One in every 300 homes had a filing in January, according to RealtyTrac. That is twice the national average.

(Read More: Big Banks Told to Review Their Own Foreclosures )

States that require a judge in the foreclosure process, like Illinois and New Jersey, saw big January jumps in foreclosure auctions (sales back to the bank or to an investor), but non-judicial states saw the biggest increases in newly started foreclosures. In Nevada, where new legislation slowed the process dramatically last year, foreclosure starts were up 87 percent from a year ago.

While the numbers can be parsed in many ways, the bottom line is that while fewer borrowers are getting into trouble, an enormous backlog of distress is still moving through the foreclosure system, in some places quite quickly, and in others ever more slowly. Until the overall numbers come down to a more normal level, any speculation on overall price stability is risky at best.

(Read More: Mortgage Mess StillMires US Housing Recovery)

Article source: http://www.cnbc.com/id/100460456

Delinquencies dropped 6 percent annually in 2011 and 7 percent in 2010. This after jumping over 50 percent in each of the previous two years. The trouble is not with new loans but with a long legacy of troubled loans from the housing boom. While these loans make up 60 percent of mortgages outstanding, they account for 90 percent of loans gone bad. Attempts at loan modifications as well as long delays in the foreclosure process have kept these loans stuck in a bloated pipeline.

There are borrowers today that have not made a mortgage payment in several years but have still not lost their homes. New laws in California and Nevada slowed the foreclosure process considerably, while New York and New Jersey are still facing huge backlogs of bad loans that will take years to make their way through the states’ court process.

(Read More: New Housing Fears: Home Prices Are Rising Too.)

Nationally, the mortgage delinquency rate now stands at 5.19 percent, down from 6.01 percent a year ago, but still far from the historical average of around one to two percent. While loans made in the past few years, using far stricter underwriting, are faring very well, there is a concern that thousands of mortgage modifications made during the same time will default again. Negative equity, while improving, continues to plague millions of borrowers and makes selling the home impossible. Should these borrowers need to move, they will likely have to default on their home loans.

(Read More: Why Home Builders Won’t Drop New Home Prices,)

Article source: http://www.cnbc.com/id/100453098

The new rules could make mortgage servicing more expensive, especially for those specialty servicers and level the playing field between them and the big bank servicers. That is because many of the new rules are similar to rules the big banks are already following under the $25 billion servicing settlement signed early last year with state attorneys general and the Department of Justice over “robo-signing” foreclosure abuses. The specialty servicers have no such mandates.

(Read More: Homeowners With No Mortgage Offer Recovery Clues)

“If you’re a good servicer who’s been doing sensible things, this will probably be about what you are doing now, just with a heavier enforcement regime behind it,” said CFPB Director Richard Cordray. “For servicers that have been doing a poor job, and many of them have, they will have to change their processes and get in line.”

The new rules include some very basic service standards, like clear monthly statements, prompt payment crediting and quick correction of errors; In other words, common sense that one might not expect to see mandated by a federal regulator.

“This shows just how poorly performing the mortgage servicing industry was before the crisis, and then as volumes increased in delinquencies during the crisis, it all exponentially worsened,” said Cordray.

(Read More: US Home Prices Surge Despite Distress)

Most of the rules focus on those delinquencies. First, and perhaps foremost, servicers may not move forward with a foreclosure while simultaneously working with a borrower to avoid foreclosure. This “dual tracking” led to thousands of borrowers losing their homes when alternatives were well within reach.

Article source: http://www.cnbc.com/id/100385527

Foreclosures and default notices in California and the Bay Area have subsided back to their 2007 levels. Foreclosures are still running about double historical averages, but are a far cry from the sky-high levels during the worst of the housing crisis in 2008.

“The worst is absolutely past us,” said Christopher Thornberg, principal with Beacon Economics, an economics consulting firm. “There is no doubt about it – foreclosures are down, delinquencies are down. It’s clear we are in the healing process. The only question is the pace of recovery.”

In 2008, a quarter of a million California homes were repossessed by lenders, according to data from ForeclosureRadar.com, a Discovery Bay real estate service. This year, the state is on track for about 107,600 homes to go into foreclosure – a decline of 56 percent – assuming the rate established from January through August is maintained. From 1980 to 2011, California’s annual average number of foreclosures was 55,054, according to San Diego’s DataQuick.

In the nine-county Bay Area, 2008 saw 37,600 homes repossessed; this year the region should see about 15,600 foreclosures, a decrease of 58.5 percent, ForeclosureRadar said. That compares with an average of 6,917 Bay Area foreclosures a year from 1980 to 2011.

The pattern holds true in even the hardest-hit counties. Contra Costa, for instance, had 11,380 foreclosures in 2008 and this year is on track to have 4,120. Notices of default, the first step in the foreclosure process, are likewise on a downward trajectory, which presages fewer foreclosures ahead. Fewer than half of default notices result in foreclosures.

It’s not all pretty

To be sure, plenty of distress remains. Millions of homeowners are underwater, owing more than their house is worth. That condition, combined with a financial shock – job loss, illness, business reversal, divorce – lays the groundwork for getting behind on mortgage payments.

“We shouldn’t pretend that everything is hunky-dory,” Thornberg said. “Clearly, some of those underwater people are still delinquent. But there are simply fewer of them than there were before. And a lot of people who are underwater are only modestly so. They see the writing on the wall and know their houses will recover value.”

The recovery is the result of enough time having elapsed since the housing collapse in 2008, Thornberg said, pointing out that the people who received the most toxic subprime loans during the housing boom of the early 2000s have already lost their homes.

Sean O’Toole, CEO and founder of ForeclosureRadar, believes government intervention also made a difference. “There has been a lot of (political) pressure on banks and regulators to slow or stop foreclosures,” he said.

Modifications growing

Back in 2006, the time between notice of default and foreclosure averaged 133 days in California, according to ForeclosureRadar. As of August, it averaged 291 days, as various programs and laws went into effect to build in more ways for homeowners to get modified loans.

While help for homeowners remains frustratingly difficult for many, numbers show that loan modifications are slowly gaining traction.

In the second quarter, banks modified 416,036 loans, and started 302,636 new foreclosure actions nationwide, according to the Comptroller of the Currency, a federal government bank regulator that oversees 60 percent of all U.S. first-lien mortgages. Across the country, those modifications reduced borrowers’ monthly payments by an average of 24.6 percent, or $381, it said.

The decline in foreclosures and default notices rebuts the theory that the so-called “shadow inventory” – legions of homes already repossessed by banks or ones that eventually will go into foreclosure – could swamp the real estate market, undermining the recovery. Experts say there simply doesn’t seem to be that many homes in the foreclosure pipeline.

“The banks are not sitting on tens of thousands of vacant (foreclosed) homes,” O’Toole said. “I don’t think there is any chance (shadow inventory) could swamp the market. The regulatory and accounting framework now is geared around letting the banks slowly dole (foreclosures) out over a long period of time so there is no shock to the market.”

Controlling the flow

O’Toole believes there are many homeowners who are behind on payments but haven’t yet received notices of default. But he also thinks banks will make sure those not-yet-official delinquencies trickle through the foreclosure process, as it is to their advantage to avoid a tsunami of foreclosures that would depress prices.

Some people who think a shadow inventory could still overwhelm the housing market have bolstered their theories by pointing out that only about 10 percent of bank-owned foreclosures are on the market at any given time. O’Toole said that is simply a function of an orderly process.

“It takes banks on average nine months to sell a foreclosed home,” he said. “Most of that time is spent doing the eviction, cleaning up the house, and then it is on the market for a short period of time and goes into escrow before it is finally sold.”

So at any given point, most bank-owned foreclosed homes are either being readied for resale or in escrow, he said.

Shrinking numbers

People who work directly with struggling homeowners report that their numbers seem to be shrinking.

“There is still definitely a need, although it is lessening,” said Sheri Powers, director of Oakland’s Unity Council, a nonprofit community development group. “Fewer people are contacting us for assistance or coming to our foreclosure prevention workshops.” Inquiries for foreclosure-prevention help are down by 40 percent, she said.

“Of course, for each person, it is very personal and very urgent,” she said.

She’s also seeing a shift in demographics, with more higher-income homeowners seeking help.

Traditionally, about 5 percent of Unity Council’s homeowner clients earned above 120 percent of the median income for Alameda County (this threshold would be $112,200 for a family of four); in the past year, about 18 percent of clients were above that level, she said. Most commonly, their situation was caused by losing a job or seeing self-employment income decline.

“They have run out of options, out of equity, out of lines of credit,” she said. “Push has come to shove, and now they’re seeking assistance.”

Carolyn Said is a San Francisco Chronicle staff writer. E-mail: csaid@sfchronicle.com

Article source: http://www.sfgate.com/realestate/article/Foreclosures-default-notices-plunge-3910965.php

Just as we saw a double dip in home prices, we may be seeing another surge in foreclosures.

And just as the home price scenario was caused by artificial government stimulus, in the form of the home buyer tax credit juicing home sales only briefly, the foreclosure scenario was caused by real negligence, in the form of the “robo-signing” paperwork scandal.

Banks and servicers stopped foreclosures entirely for a time after the malpractice was discovered, and courts delayed the process, picking through papers as foreclosures were resubmitted; that is now turning around.

The system is ramping up again, and foreclosure starts are up dramatically, more than 10 percent in June from the previous month, according to Lender Processing Services (LPS). The good news of the past few months has been that while the end game is quickening, as stalled foreclosures are making their way through the system at a faster pace, new delinquencies were decreasing, leading us all to believe that the crisis is abating.

Well think again.

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Article source: http://www.cnbc.com/id/44035254?__source=RSS*blog*&par=RSS

Let me preface with an apology for the huge supply of numbers in this post, but if you can make it through them all, I think you will get the picture I’m drawing here.

The so-called “shadow inventory” of residential properties is falling, according to a new report from CoreLogic.

This is the number of homes with seriously delinquent loans (90+ days), loans in the foreclosure process and bank-owned homes which are not yet listed for sale.

The supply as of April 2011 declined to 1.7 million units, representing a five months’ supply. This is down from 1.9 million units, also a five months’ supply, from a year ago.

“The decline was due to fewer new delinquencies and the high level of distressed sales, which helped reduce the number of outstanding distressed loans,” according to the report.

Good news, no? Wait. There’s more:

“In addition to the current shadow inventory, there are 2 million current negative equity loans that are more than 50 percent or $150,000 “upside down.” These current but underwater loans have increased risk of entering the shadow inventory if the owners’ ability to pay is impaired while significantly underwater.”

And then there’s this other report from Lender Processing Services (LPS), which also reports a drop in newly delinquent loans, but gives the actual, mind-numbing numbers of loans in trouble:

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Article source: http://www.cnbc.com/id/43495174?__source=RSS*blog*&par=RSS

Barely a few minutes after reading an article in the Wall Street Journal about banks finally opening the “spigot for commercial real-estate,” the folks over at Trepp issued their monthly report on the delinquency rate for commercial mortgage backed securities (CMBS); let’s just say it isn’t good.

After two months of very minimal rate increases, the number jumped in April, 23 basis points, to 9.65 percent, “the highest reading in the history of the CMBS market,” according to Trepp.

To say the recovery is, as the report notes, “bumpy,” is putting it mildly. The rate should be going down for two reasons:

First, as new CMBS deals, which are generally current loans, are added to the pool of all CMBS loans, the larger denominator in itself should push the rate down. Second, “special servicers have been resolving a greater number of troubled legacy CMBS loans than they were 18 months ago,” according to Trepp. And yet the rate goes higher.

So now the balance of delinquent loans exceeds $62.8 billion, up from $61.5 billion in March.

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