As it indicated in its "first look" at June mortgage performance data released last month, Black Knight Financial Services said today that the nation's foreclosure inventory - those mortgage loans in process of foreclosure - is disproportionately distributed in states that use a judicial process, i.e. require a courts approval for a lender to complete the repossession of a home.    The company's Mortgage Monitor Report for June takes a closer look at these inventories which, while declining nationally, are 3.5 times as high in judicial as in non-judicial states.



Kostya Gradushy, Black Knight's manager of Research and Analytics pointed out that the foreclosure inventory rate has declined nationally for 26 straight months and it currently at its lowest level since April 2008.  "But this can obscure the stark difference that remains between judicial and non-judicial states.  Although judicial states account for about 42 percent of all active mortgages, some 70 percent of loans in foreclosure are in these states," he said.   "Today, the share of loans in foreclosure in judicial states is 3.23 percent - a significant decline from its January 2012 high of 6.6 percent, but still more than four times higher than the pre-crisis 'norm.' Further, more than 60 percent of the foreclosure inventory in judicial states has been past due for two years or more. In fact, these loans have been delinquent an average of 1,084 days, as compared to just 775 days in non-judicial states. The states with the highest number of average days past due for loans in foreclosure are all judicial states: New York and Hawaii are each above 1,300 days, while New Jersey and Florida both top 1,200 days."



Black Knight also looked at loan modifications and found that overall activity was down to an average of 45,000 modifications per month thus far in 2014.  However, Gradushy points out that the share of modifications through the Home Affordable Modification Program (HAMP) has increased over the last five months and the joint Housing and Urban Development and Treasury Department program accounted for over 60 percent of all modifications in May and 50 percent for the first five months of the year. "The data also showed that all vintages of HAMP modifications are performing significantly better in terms of re-default rates than proprietary modifications (those negotiated by the lender outside of HAMP) overall, as well as for modifications with reduced payments for the borrower. In most cases, proprietary modifications were almost twice as likely to re-default six months after modification than HAMP-modified loans," he said.



Black Knight also noted that prepayments of mortgages, usually closely tied to refinancing activity, have picked up in the last few months.  It notes an increase in prepays among more recent vintages of mortgages, those originated between 2009 and 2012.  It also said that prepays were highest among mortgages held by individuals with the highest credit scores and that there was significant regional variation with the West and Midwest in the main having more prepay activity that the Northeast and South.

Originations have also been recovering from the trough they hit in late 2013, but refinancing, with 35 percent of originations, is at its lowest point since 2008.  The government share of originations remains over 80 percent.

Finally, Black Knight found home sales volume rebounding as expected due to seasonal effects. Distressed sales (REO or short sale) continue to decline overall, while short sales in particular are making up an ever-smaller share of that diminishing volume and selling for less of a discount than traditional sales. After accounting for nearly 60 percent of all distressed sales at the end of 2012, short sales now make up fewer than 34 percent of non-traditional transactions. While short sale discounts are shrinking, those on REO properties remain stable at around 25 percent.