lps mortgage monitor - october 2012

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LPS Mortgage Monitor

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November 2012 Mortgage Performance Observations

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Data as of October, 2012 Month-end

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October 2012 Focus Points

• Focus 1: September delinquency spike reversed in

October 2012 Focus Points

p q y pOctober; foreclosures down due to National Mortgage Settlement (“NMS”)

• Focus 2: Largest YoY house price increase since 2006; low total sales with high % of distressedg

• Focus 3: Originations still relatively strong despite Sept drop; non-government share increasingSept drop; non government share increasing

• Focus 4: State specific legislation is impacting foreclosure processes beyond judicial vs non


foreclosure processes beyond judicial vs. non-judicial distinction

Focus 1 Summary:

• Delinquencies down; September payment

Monthly Mortgage PerformanceDelinquencies down; September payment issues related to short month resolved

• Foreclosure starts down sharply due to• Foreclosure starts down sharply due to NMS; associated drop in foreclosure inventoryinventory

• Longer term DQ and FC trends improving– Delinquencies >30% lower than Jan-10 peak– Watch foreclosure activity over the coming


months

DQs in-line with seasonal trends; FCs down almost 7% due to lower starts

Early stage “self” cures and modification dominated late

stage cures drove drop in DQs(Appendix, Slide 18)


NMS drove a drop in FC starts; expect a rebound in coming months

Settlement requires 14 day notice to borrowers prior to referral; letters were

sent in September and October


Focus 2 Summary:

• House prices continue to rise nationally; on

HPI and Home SalesHouse prices continue to rise nationally; on pace for 5-7% YoY appreciation by Dec-12

• Overall sales volumes remain low with• Overall sales volumes remain low with distressed transactions at historic highsO th i 12 th• Over the prior 12 months:– 4.07 million total transactions– REOs = 16.1% (656k)– Short Sales = 16.2% (661k)


LPS HPI up 3 6% year over yearLPS HPI up 3.6% year over year

National house prices are down 22.8% from the J 2006 kJune 2006 peak


Almost one third of all transactions over the prior year were distressed

12 months through Sep-12

12 month sales peaked at 8.2 million in Nov-05

(260k distressed) g p4.1 million total sales

(1.3 million distressed)

(260k distressed)


Focus 3 Summary:

• Originations fell in September due to

Originations and CharacteristicsOriginations fell in September due to shortened month, but expect a rebound based on October prepaymentsbased on October prepayments

• Non-government originations continue to riserise

• Mortgage spreads continue to be wide; FHA till ti hi h t i k bstill supporting highest risk borrowers


Sept originations dropped with short month; higher Private / Portfolio share

Private / Portfolio SharePrivate / Portfolio Share2009: 9% 2010: 11%2011: 13% 2012: 16%


Mortgage spreads remain elevated; rates consistent across product

138 bps197 bps

p


Focus 4 Summary: Foreclosure

• State specific actions / legislation have had

process disparities and impactsState specific actions / legislation have had significant impact on pipeline ratios

Maryland Hawaii Arkansas and Nevada are– Maryland, Hawaii, Arkansas and Nevada are examples

– California Homeowners Bill of Rights goes intoCalifornia Homeowners Bill of Rights goes into effect in January

• Large differences persist in judicial and non-• Large differences persist in judicial and non-judicial foreclosure timelines and inventory over-hang


over-hang

Impact of FC reform in NV lower vs. other states; CA to change in Jan-13

NV pipeline ratio has doubled since Oct-11

FC reform law; CAFC reform law; CA Homeowner’s Bill of Rights begins Jan-13


FC inventory in judicial states remains over 3x non-judicial

Seven of the top 10 states for total non-current are judicial

(Appendix, slide 17)


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November 2012 Appendix

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Data as of October, 2012 Month-end

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October 2012 Data DashboardOctober 2012 Data Dashboard


Seven of the top 10 states for total non-current are judicial

Average year over year change in non-current percent


(includes loans 30+ Delinquent or in Foreclosure)Judicial = -5.0% Non-judicial = -10.4%

Cures jumped with October “make-up” payments and modifications


FC sales maintained stable national trend while starts dropped sharply


Drop in foreclosure starts supported a drop in overall inventory


Prepayment speeds rebounded in October indicating more originations


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Disclosures: Product / Metric Definitions and July 2012 Market Sizing Revisions

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Disclosure Page: Product DefinitionsDisclosure Page: Product Definitions

*Conforming limits do not account for temporary or high-cost area increases.


Disclosure Page: Metrics DefinitionsDisclosure Page: Metrics Definitions

• Total Active Count: All active loans as of month-end including loans in any state of delinquency or foreclosure. Post-sale loans and loans in REO are excluded from the total q yactive count.

• Delinquency Statuses (30, 60, 90+, etc): All delinquency statuses are calculated using the MBA methodology based on the payment due date provided by the servicer. Loans in foreclosure are reported separately and are not included in the MBA days delinquentforeclosure are reported separately and are not included in the MBA days delinquent.

• 90 Day Defaults: Loans that were less than 90 days delinquent in the prior month and were 90 days delinquent, but not in foreclosure, in the current month.

• Foreclosure Inventory: The servicer has referred the loan to an attorney for f l L i i f l i t f f l t lforeclosure. Loans remain in foreclosure inventory from referral to sale.

• Foreclosure Starts – Any active loan that was not in foreclosure in the prior month that moves into foreclosure inventory in the current month.

• Non-Current: Loans in any stage of delinquency or foreclosure.y g q y• Foreclosure Sale / New REO: Any loan that was in foreclosure in the prior month that

moves into post-sale status or is flagged as a foreclosure liquidation.• REO: The loan is in post-sale foreclosure status. Listing status is not a consideration,

this includes all properties on and off the market


this includes all properties on and off the market.• Deterioration Ratio: The ratio of the percentage of loans deteriorating in delinquency

status vs. those improving.

With the June 2012 month-end data LPS has updated itsWith the June 2012 month end data, LPS has updated its extrapolation methodology to incorporate, among other things, improved estimates of market size, which includes hi h f t d b i d t dhigher coverage of government and subprime products and increases LPS’ estimate of the total first lien residential mortgage market by three percent to 50.4 million.

To ensure consistency in trend analysis, the new methodology has been applied to all historical data andmethodology has been applied to all historical data and previously reported mortgage performance statistics have been adjusted accordingly.

The following section contains information on market coverage and comparisons with previously reported


statistics. Additional information is available upon request.

The new scaling increases overall estimated industry loan count by approximately 1.2 million loans

Prior industry estimates declinedPrior industry estimates declined because scaling didn’t support current servicing transfer volumes


New scaling reflects the higher coverage of government loans and allows for the incorporation of new servicers


Delinquencies decline based on higher estimated coverage of FHA and subprime loans.

Converge due to new servicers and transfer issues with prior scaling


Foreclosure inventory remains almost identical, but shifts up in recent months as transfer bias is repaired


Foreclosure starts remain consistent, withrates shifting up slightly


Performance Statistics Changes: Database CountsPerformance Statistics Changes: Database Counts


Performance Statistics Changes: State Level DetailPerformance Statistics Changes: State Level Detail


lps mortgage monitor - october 2012

Real Estate

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top 10 states

disclosure page

90 days delinquent

performance statistics

prior month

foreclosure inventory

delinquency statuses