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LPS Mortgage Monitor


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									LPS Mortgage Monitor
Current Mortgage Performance Observations

January 31, 2009 Performance Data
Prepared as of February 20, 2009
                         February 2009 Mortgage Performance Package
                          Data as of January 31, released Feb 15, 2009
                                        Outline / Agenda

•   Delinquency and Foreclosure overall industry perspective for January 2009.

•   Focus on Jumbo Prime deterioration:
     – Product Market share comparison by count vs. balance with a focus on Jumbo prime deterioration
     – Putting the problems in context

•   Foreclosure starts and inventories vs. foreclosure sales / completions: Where is the impact of
    foreclosure preventions efforts?

•   Update on recidivism rates for modified loans.

•   State focus: Overview of foreclosure inventory and timeline trends for selected states.

•   A return to prepayments: Prepayment rates have increased significantly over the last couple months. Is
    it helping the borrowers who need it?

•   Roll rates and bankruptcies: Looking past the top level delinquency figures.

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Total delinquency leveling off in January but increasing despite seasonality effect
                      January Total Delinquencies = 8.40%
     Month over Month Increase of 1.16%, Year over Year Increase of 46.18%

  Foreclosure inventories continue to trend upward across all products
                 January ‘09 Foreclosure Rate = 2.06%
Month    M hI            f 7.79%, Y        Y    I         f 72 80%
M h over Month Increase of 7 79% Year over Year Increase of 72.80%

 Foreclosure starts continue to increase across product types over the past several
                    months in spite of moratoria and mitigation.
Non-Agency                                                                  2008,
Non Agency Jumbo Prime starts have increased almost 125% since January 2008 the
                                 most of any product

Foreclosure inventory pace of growth is highest for Jumbo Prime and Option ARMs

Even over a shortened time horizon, acceleration of deterioration in Jumbo Prime
                           exceeds all other product

 New Origination Jumbo Prime are underperforming Agency product despite higher
                      FICOs and comparable interest rates
Q3 2008: FICO = 761 Jumbo vs. 748 FN/FH, Interest Rate = 6.14 Jumbo vs. 6.20 FN/FH

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Distributions display the disproportionate impact of the Non-Agency Jumbo Prime and
 Option ARM Product. However, despite high rates of deterioration Non-agency jumbo
                       prime delinquencies remain relatively low.

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Headline foreclosure percentage reductions are focused on foreclosure sales where the
           impact of moratoriums and loss mitigation are most pronounced

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The trend for Foreclosure starts remains higher and in the case of FNMA and FHLMC
         (Agency product) rates are actually accelerating in recent months.

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As a result, foreclosure pre-sale inventories continue to rise

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Seasonality may be positively impacting 30 and 60 day defaults. However, the record
 levels of new DQs from November are just now nearing foreclosure and new DQs
  (Current to 30 rolls) in the LPS AA universe have been 500,000+ for six months.

            Loan counts are based on LPS Applied Analytics Servicing Database of over 34 million mortgages.

    Recidivism Rates And Total Volume of Loans Modified in 2008
25% of Q4 2008 Modifications were delinquent as of January month-end
                 (up from 10% in December 2008)

 Volume of Modifications based on data compiled by LPS Applied Analytics for the HOPE NOW Alliance.

              Loss Mitigation Activity - Status of Loans Prior to Modification
Efforts are focused primarily on seriously delinquent loans, only 15% of modifications in
                            2008 were on loans in foreclosure

   Florida foreclosure inventories are extremely high and continue to increase.
                              2008,California                                  high.
After improving briefly in Q3 2008 California foreclosure rates have hit a new high

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National Foreclosure Timelines have increased from 133 days in January to 194 days in

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When viewed as a factor vs. January 2008, National Foreclosures have increased
almost 150%. California and Florida have increased more or less in-line with the
                               national average.

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Lower rates and increased refinances are manifesting with a return to higher
               rates                                             ranges.
  prepayment rates. CPR increased significantly across all FICO ranges

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However this wave of refinances is impacting only borrowers who are current on their
               mortgages: Troubled borrowers are not getting help

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   More loans deteriorated than improved in each of the last ten months
“Better” rates include loans “improved” through pay-offs and modifications.
 “Worse” rates are held artificially low by moratoriums in foreclosure sales.

Thirty Day and Sixty Day Loans continue to show declining rates of cures to an
                        improved delinquency status.

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Interesting trend in bankruptcies as it appears that more are occurring on current
 loans, pointing to potential problems down the road not reflected in the current
                                 delinquency rates.

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                          Conclusions: January 2009 Month-end data

•   Overall Delinquencies continue to increase, achieving another all-time high. Relative short term
    stabilization at current high levels is not viewed as a p
                               g                                     , particularly since seasonality should
                                                             positive, p          y                 y
    be lowering rates.
•   Headline improvements in foreclosure rates refer only to sales. Foreclosure starts and inventories
    continue to increase despite moratoria and loss mitigation efforts.
•   Recidivism rates show no signs of improvement in the quality of modifications during the fourth
    quarter of 2008.
•   In prior reports, the deterioration in the Alt-A dominated 5/1 hybrid product has been an area of
    focus. This month we turn to the most traditionally reliable product jumbo prime.
•   Though it should be noted that delinquency rates remain relatively low in comparison, over the last
    12 months the rate of deterioration in jumbo prime has exceeded all other product.
•   Deterioration rates for foreclosures are highest for jumbo prime and Option ARM product.
•   These two products represent only 6% of outstanding mortgages based on loan count, but 17%
    based on unpaid principal balance.
•   Newly originated non-agency jumbo prime loans are performing worse than FNMA and FHLMC
    originations which may be cannibalizing some of the jumbo product through higher loan limits.
•   Prepayments have increased significantly in January and December, but increase in liquidity is
    concentrated most in borrowers who need help least.

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