Some Good News And Some Bad News On Foreclosures

The housing market is getting back its sea legs or the housing market is still wobbling. Depending upon what set of statistics you want to look at, you can make the case for either scenario.

The good news from HousingWire:

In particular, roll rates — which measure the volume of loans moving from good to bad, and from bad to worse — improved during June, with new delinquencies dropping to their second lowest level in the last year, the firm said. The percentage of delinquent loans moving from bad to worse declined across all product types, as well. Which is at least some good news for a market that has been in dire need of something positive for the better part of two years running.

The bad news from HousingWire:

But for the nascent improvements now being seen, there remain numerous hurdles that suggest the nation’s housing market isn’t really out of the woods just yet. In particular, foreclosures soared to new record highs in June, LPS found: The national foreclosure inventory rate during June was 2.86%, up 2.5% from one month earlier and a huge increase of 86.1% from year ago levels. Total delinquencies rose as well, to 8.58%, up 44% from one year earlier.

Reflecting the mortgage crisis’ evolution away from all things subprime, prime jumbo mortgages continue to fare the worst, comparatively: foreclosures among good-credit borrowers with high loan balances are up a whopping 580% since Jan. 2008, LPS said.

And it’s not just the overall inventory of foreclosures that is increasing, either: New foreclosures are on the rise, as well. “Foreclosure starts in June increased 1.6 percent to the second highest level on record, while reinstatement and recidivism rates are not yet showing signs of improvement,” LPS said in a statement. Backing this sort of logic up, July ABX remittance data released Tuesday found that modification rates had actually declined slightly during the month among most of the tradeable indexes. (The ABX is a synthetic tradeable index referencing a basket of 20 subprime mortgage-backed securities.)

I’m inclined to take this overall as a positive. There’s a big pig in the middle of the housing python and it’s slowly making its way through the snake. So long as there aren’t more pigs going in the front end — and it appears as if that might be the case — then you can start to see an end to the problem.

That doesn’t mean there isn’t a lot of pain yet to come, just that the pain won’t be eternal.

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