“One cautionary note is that the 90 day delinquency rate increased by 8 basis points, reversing a fairly steady pattern of decline and the largest increase in this rate in three years,” notes the MBA’s chief economist Jay Brinkmann.

(Read More: Why Sequestration Will Hit Housing on Several Fronts)

These so-called “seriously delinquent” loans are being processed more quickly now that new foreclosure rules are in place and will therefore be sold back to banks or investors in the next few months. Those sales would therefore be shown as loans coming out from underwater because they would cease to exist.

Another important factor in looking at negative equity, as with everything else in real estate, is location:

“Among the nation’s 30 largest metro areas, those with the highest number of homeowners freed from negative equity last year were Phoenix (135,099 homeowners freed in 2012); Los Angeles (72,936 homeowners freed in 2012); Miami-Fort Lauderdale (70,484 homeowners freed in 2012); Dallas-Fort Worth (59,461 homeowners freed in 2012); and Riverside, Calif. (58,417 homeowners freed in 2012),” notes the Zillow report.

(Read More: Taking The Real Estate Recovery Local)

The highest volume of underwater borrowers were in the most distressed states, where the foreclosure rates are high and where investors are pursuing short sales fervently. It is therefore incorrect to make the assumption that all of the “newly freed” borrowers are either still in their homes with newfound equity or sold at any kind of profit. Of course this also means that negative equity may cure faster than anticipated, since it is so highly concentrated in certain hot investor markets.

The return of home equity is good news for the greater economy, as it makes borrowers feel better about their own personal wealth and therefore more apt to spend. It could also prompt more borrowers to sell their homes. Unfortunately that will not do much to ease the severe inventory shortage of homes for sale, as most sellers will be buyers as well. There are currently just 1.74 million homes for sale, the lowest since December of 1999.

(Read More: Fewer Borrowers Are Behind on Mortgages, but for How Long?)

Article source: http://www.cnbc.com/id/100480500

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 programs then going forward will provide for similar relief, but I think we have offered principal reduction to all our borrowers — all the people we own, the asset that we can actually offer to that’s been done,” said Bank of America CEO Brian Moynihan in an interview last week.

Another report Friday from Lender Processing Services showed a monthly increase in the U.S. loan delinquency rate in November. As it stands now, 7.12 percent of loans are 30-plus days past due, but not yet in foreclosure, and 3.51 percent are in the foreclosure process. Add it up and 5.35 million loans are still in some kind of trouble, according to LPS, as big banks finish their obligations under the settlement.

—By CNBC’s Diana Olick; Follow her on Twitter @Diana_Olick or on Facebook at facebook.com/DianaOlickCNBC

Questions? Comments? RealtyCheck@cnbc.com

Article source: http://www.cnbc.com/id/100335126

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It’s one thing to jump on the bandwagon when things are getting better, it’s quite another to jump off of it when everyone around you, not to mention your own company’s earnings, would seem to confirm that sentiment. But that’s just what Donald J. Tomnitz, CEO of D.R. Horton

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“I still don’t see a lot of jobs being created,” he told an earnings conference call, sending his company’s stock down when it should have been riding higher on a 24 percent year-over-year jump in new orders for homes. He is concerned about the future of this fledgling housing recovery, and he has reason to be. Mortgage delinquencies and foreclosures are driven by unemployment.

The homebuilders are rising from the ashes, after overbuilding and a credit crash sent sales and construction to levels not seen economists began counting all those numbers; they are rising, but not necessarily thriving. While overall buyer demand has been weak, distressed properties (foreclosures and short sales) have stood as the greatest competition, as many of those homes are in fact relatively new construction.

The good news is that mortgage delinquencies are falling, down to 5.41% of all mortgages outstanding in Q3 of 2012 from 5.88% a year ago, according to a new report from TransUnion.

“Continued declines in mortgage delinquency rates are a welcome sign and reflect that relatively more homeowners are able and willing to make their mortgage payments each month,” said Tim Martin, group vice president of U.S. Housing in TransUnion’s financial services business unit. “However, we still have a long way to go to reach more ‘normal’ conditions of a delinquency rate in the 1-2 percent range for the U.S. average.”

(Read More: Let Real Estate Help Pay for Retirement)

The recovery, like all real estate, is becoming increasingly local, with the hardest hit markets, like Arizona and California recovering faster than New Jersey and Illinois. One disturbing finding from TransUnion: 49 percent of metropolitan areas saw quarterly improvement in their mortgage delinquency rates in Q3, down from 76 percent in Q2 and 73 percent in Q1.

The reason areas in Arizona, Nevada and California are improving so dramatically is because of high investor demand. Investors have driven supplies of distressed properties there so low that those markets are now seeing double digit home price increases. Even those higher prices are not driving investors away because there is still so much rental demand that rents are rising.

“Nationally, rental leasing volumes were up sequentially every month during the last two years,” according to CoreLogic’s November ‘MarketPulse’ report. “Over this same period, an average of 42,000 rentals were added to the stock of rental homes each month. This is more than twice the average flow that the U.S. was experiencing prior to the housing recovery.”

This investor-fueled recovery helps in the short term, but in the long term housing needs to be driven by a healthier economy, income growth and consumption and rising home prices, according to CoreLogic.

(Read More: Home Depot Raises Outlook as Housing Market Improves)

“We are in the second inning,” said Ara Hovnanian, CEO of Hovnanian Enterprises
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Too much uncertainty in the economy lies ahead, and housing lies in the balance.

Sector Watch: U.S. Homebuilders

—Toll Brothers
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—DR Horton
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—Hovnanian Enterprises
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—PulteGroup
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—Ryland Group
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—Lennar Corp
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—Beazer Homes USA
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—Meritage Homes
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—KB Home
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Questions?  Comments?