‘Legacy Loans’ Keep Mortgage Defaults, Foreclosures in Play

from the good folks at the “Albuquerque Journal” via  Mortgage Servicing News

The housing bubble may be fading in the rearview mirror, but its legacy of lax lending and inflated home values have kept foreclosures and mortgage delinquencies higher than normal both in the Albuquerque metro area and much of the country, CoreLogic reported.

“Newly delinquent loans are at the lowest rates during the last two decades. That reflects the tight underwriting and improved economy during the last few years,” says Frank Nothaft, chief economist at CoreLogic, in its latest foreclosure report.

What’s keeping foreclosure and delinquency rates elevated are the so-called “legacy loans” made during the bubble in the mid-2000s.

The Albuquerque metro area registered a foreclosure rate of 2.2 percent in July, down from 2.3 percent a year earlier and well off the high of 4.2 percent in April 2012, according to the real-estate data and services provider. The average foreclosure rate nationwide was 1.3 percent in July.

A foreclosure rate of around 1 percent would be the historic norm in the metro area.

New Mexico is one of 22 states with a judicial process for handling foreclosures.

As a result, those 22 states tend to have higher foreclosure rates because of the way foreclosure actions linger in court systems.

Nine of the 10 states with the highest foreclosures rates have a judicial process. New Mexico ranked sixth with a rate of 2.1 percent as of July. New Jersey, also a judicial foreclosure state, had the highest rate at 4.8 percent. Alaska had the lowest at 0.3 percent.

The 90-day-plus delinquency rate in the metro, which is an indicator of future foreclosures, was 4.4 percent in July, down from 4.9 percent a year earlier and the high of 6.8 percent in June 2012. The average 90-day-plus delinquency rate nationwide was 3.5 percent in July.

“As we enter the final months of 2015, the housing market continues to gather steam buoyed by improving economic conditions and the release of pent-up demand for homeownership,” Corelogic President and CEO Anand Nallathambi says in the report.

“The recovery in the housing market is also reflected in declining delinquency and foreclosure rates which, to some degree, reflects the progressive clearing of crisis-era loans and the benefits of tighter underwriting standards over the past six years,” he says.

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