Mortgage delinquencies, defaults and foreclosures have been an absolute drag on the United States economy since the bursting of the housing bubble years ago. As the housing market recovers, however, the number of borrowers unable to make payments or hold on to their homes is thankfully diminishing.
According to a recent report published by mortgage analytics and servicing firm Lender Processing Services (LPS), an improvement in monthly payments was observed from February to March 2013. In annual terms, late mortgage payments and overall losses improved by three percent; this represents the best situation since 2008.
More specifically, the number of monthly mortgage payments late by more than 30 days dropped to 6.59 percent. In early 2013, that percentage was 6.8 percent. While this is a welcome improvement under the current circumstances of the housing economy, the optimal rate for delinquencies in the U.S. should be less than five percent.
The LPS report shows even greater improvement in terms of foreclosures, which decreased nearly 20 percent since March of 2012. Back then, the foreclosure rate across the U.S. was 4.2 percent; that rate has fallen to 3.4 percent. According to Nick Timiraos of the Wall Street Journal, mortgage loan modifications and loss mitigation efforts such as short sales are helping curb the number of foreclosures, but reduced delinquency rates are a greater contributor overall.
In March of 2012, the LPS report calculated more than 5.5 million properties ready to be liquidated at an advanced stage of foreclosure. That number is now approximately 4.9 million. The number of properties that are in default status but not considered to be in foreclosure is now more than 1.4 million; in March 2012 that figure was greater than 1.6 million.
The LPS report is not the only recent positive news for the U.S. housing market. The National Association of Realtor recently reported that existing home sales declined slightly in March, although the overall picture shows a sharp decline in inventory since 2012.
While the figures in the LPS report are certainly welcome and encouraging, it is important to remember that the normal foreclosure rate for the U.S. housing market is about one percent.