The number of OC home loans in default continues to rise after more than three years
The latest foreclosure figures from First American CoreLogic show a growing divergence in what’s happening to problematic mortgages in Orange County, California.
The ratio of bank-owned houses and condos, known as REO, against all outstanding first mortgages declined for the 13th straight month to just 0.26% in September — the lowest in 26 months. That sounds like a good thing for the housing market and economy.
But the number of bad loans in limbo continues to escalate.
In fact, the proportion of 90-day late loans has increased each month for more than three years (beginning in April 2006) and hit 6.96% in September.
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Sam Khater, senior economist with First American CoreLogic, said in an email:
“The reason REOs have declined is that flow of distressed properties into REO has been artificially restricted due to local, state and GSE foreclosure moratoria, loan modifications and servicer backlogs.
This has led to a drop in the supply of REO properties, while at the same time sales (including REO sales) increased due to the artificially low rates and first-time homebuyer tax credits, which further depleted the supply of REOs. This dynamic has led to the rapid improvement in home prices over the last six to eight months.”
However, the mortgage distress is high and rising as is evident by the 90+ day category, which means the pending supply is building up due to high levels of negative equity and rising unemployment.
So we have a situation where at the back end (ie REOs) it appears as if it’s getting better, but it’s really a mirage as we know that the pending supply pipeline default (ie 90+ day DQs) is looming larger.
At some point, we should see more short sales and foreclosures. Maybe early next year?
Source: http://mortgage.freedomblogging.com/2009/11/07/foreclosed-homes-decline-to-26th-month-low/20885/
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