The amount of time it takes to liquidate a securitized defaulted mortgage appears to have peaked, and the timeline is starting to decline.
this year, the liquidation timeline for home loans included in residential mortgage-backed securities topped out at four years.
Since the peak, timelines have begun to decline as the inventory of severely delinquent loans now stands at its lowest level since 2007.
Those findings were detailed by Fitch Ratings in
Fitch: US RMBS Liquidation Timelines Beginning to Decline.
“Median timelines, which have historically been just below the average, have trended further below it since 2015,” Fitch said. “The widening average-median gap represents a long tail of long-timeline loans that continue to elevate the average, while the bulk of the timeline distribution has begun to shift lower.”
The New York-based ratings agency explained that the distribution of timelines varies. Although liquidations have historically occurred withing 36 months of the initial default, the rate plateaued in late 2014 and recently started to modestly increase. Fitch noted
that the rate plateaued at a higher level than all liquidated loans.
According to Fitch, the average national timeline has retreated slightly from its peak.
But in states that require judicial foreclosures like Florida, New Jersey and New York — the timeline remains well above the national level. Since Florida has worked through its large distressed loan inventory, it is more recently faring better than New Jersey and New York — where timelines have increased over the past two years and are only now beginning to decline.
In states like California, however, the timeline has outperformed the national average.