Mortgage Delinquencies Decrease, but Foreclosure Rate Likely to Hit Peak in Coming Months

By Kyle Chezum Updated on 1/21/2011

1/21/11

Lender Processing Services, a major mortgage services and analytics firm, released a report on the state of mortgage delinquency this week.  The news is good.  Delinquency has decreased almost 18% since December of 2009, to about 8.8% of mortgages.  Delinquency decreased 2.1% between November and December of 2010.

The report analyzed residential mortgages only and did not take into account mortgages that had gone into foreclosure, which gives the news a sharp edge.  The decrease in delinquent mortgages may be due to nothing more than an increase in successful foreclosure proceedings.  RealtyTrac reported thousands of foreclosures per month in 2010, and a record high of 2.87 million properties received notices of default or foreclosure.  Some states, such as Nevada, saw a more than 10% foreclosure rate, with one home out of every 84 foreclosed upon.

Though delinquency appears to have decreased in recent weeks, many economists are predicting a record number of foreclosures in 2011.  A recent Bloomberg article quoted RealtyTrac executive Rick Sharga’s prediction of a foreclosure record in the coming year.  This past year was a record in itself, with a 14% foreclosure increase from the year prior.

Sharga’s message was not one of gloom, however.  “We will peak in foreclosures and probably bottom out in pricing, and that’s what we need to do in order to begin the recovery.”  Foreclosures decreased in December by about 2% from November and an impressive 26% from December 2009, and foreclosure moratoriums established by several major banks this past year may have stalled some foreclosures that will resurface in the coming months.  The market is primed to burst with filings long overdue.

Still, fewer fresh delinquencies is a good sign.  Where the foreclosure hammer falls in 2011 remains to be seen.