The
headline news from the Lender Processing Services (LPS) Mortgage
Monitor Report for June, that
early mortgage delinquencies had surged 10 percent during the month,
was released two weeks ago in LPS's regular "first look" at its
monthly data. The full report, released this morning, added some
details to that announcement.
The
sudden increase, which LPS Applied Analytics Senior Vice President
Herb Blecher called "representatives of a documented seasonal
phenomenon," brought the national delinquency rate from 6.08 in May
to 6.68 percent in June, an increase of 9.9 percent. The rate is
still down 6.9 percent from the beginning of the year and 6.5 percent
from June 2012. The rate of foreclosures and of seriously delinquent
loans continued their decline.

There
were 700,000 newly delinquent loans in June and they were widely
dispersed geographically with every state but Vermont, for which no
information was supplied, experiencing double-digit increases. The
biggest jump occurred in two western states - Colorado which was up
31,7 percent and Utah with a 29.6 percent increase in 30+ day
delinquencies.

Delinquencies
increased for both fixed rate and adjustable-rate mortgages. The
former jumped 19 percent from May and the latter 18 percent.
Blecher
explained the seasonal nature of the increase. "Over the
last 18 years, similar changes occurred in June for all but four of
those years. And this month's increase was felt across all 50
states -- from a roughly 14 percent month-over-month rise in 30-day
delinquencies in Nevada to a nearly 32 percent upswing in Colorado.
Additionally, we examined the data to see the effect of recent
increases in interest rates on delinquency rates and found no
significant impact thus far. Adjustable-rate mortgages (ARMs), which
one would expect to be impacted most by such interest rate changes,
actually saw delinquency rates rise at a lower relative rate than
those of fixed-rate mortgages.
"Of
course, focusing solely on month-to-month shifts in mortgage
performance can be like tracking the stock market on a daily basis,"
Blecher continued. "You may see periodic spikes and dips, but
without a longer-term perspective, you lack a clear picture of how
the market is actually performing. Though June's 9.9 percent spike
was indeed significant -- and a reversal of five consecutive months
of declines -- on a quarterly basis, the rise was much more moderate
than the historical average. Since 1995, delinquency rates have risen
from Q1 to Q2 in all but two years, with an average 7 percent
increase. By comparison, the 2013 Q1 to Q2 increase was just 1.34
percent."
There
were also fewer loans that went from delinquent to current, that is
"cured" in June. The number of loans in early stages of
delinquency that cured during the month fell to a five year low and
the cure rate for more seriously delinquent loans was also down.

LPS
also reported that the serious delinquency rate (90+ days) was down
1.5 percent form May to June to a rate of 5.62 percent. This was
22.3 percent below the rate in June 2012. Foreclosure starts dropped
from 116,812 in May to 109,042 in June; there were 173,556 starts in
he previous June.
The
rate of foreclosure sales in states using a judicial form of
foreclosure has been increasing for three years but remains below
half the rate for foreclosures in non-judicial states. Consequently,
while the backlog of foreclosures is clearing, inventories in
judicial states are down only 26 percent from their peaks against a
drop of 50 percent in non-judicial states.

Increasing
mortgage rates are already having an effect on possible refinancing
opportunities. LPS examined the pool of potentially refinaceable
loans and found that, despite the improved equity situation brought
about by rising home prices nationally, fewer loans have refinancible
characteristics at the new rates. Many homeowners in fact now have
lower existing rates than those currently available. Approximately
12 percent of active loans, about 5.9 million, fit broad-based
refinancible criteria, down from 8.9 million in March of 2013 when
rates were at historic lows. Still, while prepayment rates
(historically a good indicator of refinance activity) had declined 12
percent in June in the face of rising interest rates, they were
higher than when interest rates were last at this point back in 2011.

