GSE Foreclosure Starts Start Coming Faster in 2010

The level of foreclosures starts in mortgages owned by Fannie Mae and Freddie Mac, the government sponsored enterprises (GSE), is at its highest point ever in 2010 as the rate of new foreclosures continues to increase. The June 2010 Mortgage Monitor data provided by Lender Processing Services (LPS) Applied Analytics shows that the spike in foreclosure starts is greatest at 6+ months of delinquency. Analysts have suggested that this may be occurring due to the recent increase in HAMP cancellations. Total foreclosure starts for 2010 are at 1.46m, compared to 1.68m for the same period in 2009 and 1.25m in 2008, to be sure, but the rate at which the starts increase during 1H10 is at the fastest pace LPS Applied Analytics has seen. In a conversation about the findings, vice president Herb Blecher said that “HAMP trials originally were meant to last three months, but almost 1.3m mortgages were trialed in a short period and so we know that some trials run four, five or six months before they are either converted or cancelled.” To be sure, the official HAMP default rates are different, standing a 1.7% after six months — a claim that’s hotly disputed. However, LPS finds that the foreclosure trend is not bleeding over into the market-at-large. Delinquencies and foreclosures remain stable, though elevated, with seasonal trends somewhat muted. Foreclosure starts on non-agency mortgages have also been relatively stable over the last several months, as have the rates on 90+ days default. In short, for every mortgage performing, the mortgage data analytics firm finds two are deteriorating. At a loss mitigation conference last week, Edward DeMarco, acting director of the Federal Housing Finance Agency, said that banks should consider foreclosing when borrowers are not being rehabilitated. Additionally, today’s numbers show that the six-month moving average deterioration ratio has been steadily declining over the last five months after reversing seasonal trends during late 2009. Especially positive, LPS finds that the rate of default among loans held by private investors continues to fall to below 60,000 after peaking in April 2009 at 140,000. Write to Jacob Gaffney. The author holds no relevant investments.