Mortgage Daily Logo
mortgage news from industry experts

Time to Clear Distressed Inventory Worsens

Although the number of properties in the nation’s distressed inventory has fallen, longer liquidation times have increased the number of months it would take to clear out the inventory.

The inventory of distressed properties that secure loans included in residential mortgage-backed securities was 949,000 in the second quarter.

The distressed inventory has decreased by 6.5 percent from three months prior and was down 21 percent from a year prior.

Distressed inventory includes securitized first mortgages that are either at least 90 days past due, in foreclosure or real estate owned. It also includes half of the securitized loans that had been 90 days delinquent but were cured or modified during the past 12 months.

Morningstar Credit Ratings LLC reported the findings in the Q2 2013 Morningstar RMBS Distressed Inventory Index: More Time Required to Clear Distressed Pipeline amid Fewer Short Sales and More Loan Modifications.

The ratings agency utilized data sourced from CoreLogic’s loan-level, non-agency RMBS database.

“Declines in the number of properties entering the distressed inventory and the continued liquidation of distressed inventory are factors contributing to the steady decline in distressed inventory,” Morningstar said. “Fewer properties are entering the distressed inventory as a result of improved loan performance as the monthly new delinquency rate has continued to fall since the first quarter of 2013.”

But despite the decline in the number of distressed properties, the expected time to clear the distressed inventory increased to 41 months from 40 months three months earlier and was up by three months compared to a year earlier.

The disparity reflects “much slower liquidation rates.”

In judicial states, it will take 59 months to clear the distressed inventory, while the number of months in non-judicial states is just 29 months.

The six worst states for distressed inventory rates — New Jersey, Florida, New York, Illinois, Maine and Connecticut — are all judicial foreclosure states.

Distressed inventories have seen the biggest year-over-year declines in the Metropolitan Statistical Areas of Phoenix-Mesa, San Diego, San Francisco, Detroit and Denver.

Although the share of short sales was increasing in the first-quarter report, a “surprising decline” was noted in the second quarter. But loan modifications are rising.

Popular posts

How Long Does It Take to Refinance a Mortgage
How Long Does It Take to Refinance a Mortgage

So, you’re interested in refinancing your mortgage. Maybe you want some extra capital to do that home project you’ve always dreamed of, interest rates are nearing record lows, or you want to start consolidating debt. Regardless of the motivation behind the refinance,...

How Does Refinancing a Mortgage Work
How Does Refinancing a Mortgage Work

A home purchase is considered an investment, and a robust one at that. Savvy owners are constantly looking for new ways to reduce debt, save money, pay less in interest, and ultimately build equity. Refinancing is one way to leverage your investment and do just that....

What Does It Mean to Refinance Your Home
What Does It Mean to Refinance Your Home

You can think of refinancing your mortgage as a debt redo. Essentially, you’ll swap out the existing loan for a new one - ideally with better terms and conditions. Only this time it could help you save money on high mortgage payments, rather than just borrow it....

Setting up the Utilities in My New House
Setting up the Utilities in My New House

All the tedious, time-consuming home closing documents have been signed, sealed, and delivered. Your belongings are packed into what seems like a million boxes and you have a solid plan to haul all your existing furniture to the new place. Just as your boxes and...

When Is My First Mortgage Payment Due?
When Is My First Mortgage Payment Due?

Navigating your way through a brand new mortgage loan can be a difficult task, especially for first time homeowners. After handing over a large sum of money for the down payment and closing costs, it’s important to pay attention to the timing of your first mortgage...


Don’t worry, we don’t spam

calculate your monthly mortgage payment

Related Topics

Helpful Links

Daily mortgage rate trends

Best mortgage lenders

First-time homebuyers programs by state

Loan limits by state

Types of mortgages

APR vs interest rate

Understanding PMI

Related Posts