Foreclosure starts and foreclosure sales of homes purchased with prime loans increased dramatically from January to February, and the percentage of homes completing the foreclosure process approached highs not seen since last summer.
The latest report from mortgage servicers participating in the lending industry’s HOPE NOW alliance shows that despite continued strides in helping subprime borrowers avoid foreclosure, foreclosures and foreclosure sales among prime borrowers continue to climb.
HOPE NOW put the number of foreclosure starts on prime loans during February at 157,000, a 25 percent increase from the month before. Foreclosure starts on subprime loans fell by 5 percent, to 86,000.
The record 243,000 foreclosure starts recorded in February represented a 12 percent increase from the month before and a 36 percent increase from a year ago.
While payment shock for subprime borrowers with adjustable-rate mortgage (ARM) loans was once viewed as a primary driver of delinquencies and foreclosures, delinquency rates on prime fixed-rate and subprime fixed-rate loans continue to climb, thanks to job losses and pay cuts, the Mortgage Bankers Association reported this month (see story).
HOPE NOW loan servicers reported making more than twice as many loan modifications for subprime borrowers in February (91,333) than they did for prime borrowers (42,503). More prime borrowers got repayment plans — 64,605 were negotiated last month, compared with 46,033 for subprime borrowers.
Not all homes that enter the foreclosure process end up being sold by lenders — some borrowers are able to refinance their loans, or negotiate short sales or loan workouts with lenders.
The HOPE NOW alliance said it helped 244,000 borrowers avoid foreclosure in February by instituting workouts including loan modifications and repayment plans. …CONTINUED
HOPE NOW loan servicers boosted mortgage modifications — which many experts say are more likely to provide long-term relief to borrowers — by 9 percent in February, to 134,000. The number of repayment plans instituted with borrowers fell by 11 percent, to 111,000, leaving the total number of workouts down slightly from the 248,000 achieved in January.
Nevertheless, completed foreclosure sales of homes purchased with prime loans jumped 86 percent in February, to 56,000. Foreclosure sales of homes bought with subprime mortgages fell 16 percent, to 32,000.
The 87,000 foreclosure sales for the month represented a high point not seen since July, when 92,000 foreclosed homes were sold.
Completed foreclosure sales as a percentage of starts rose to 46 percent, up dramatically from the recent low of 30 percent in December. The percentage was even higher for homes purchased with prime loans — 54 percent, compared with 25 percent in December. (The time lag between a foreclosure start and completion can range from two to 12 months, depending on the state).
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