By Mike Colpitts
Mortgage delinquencies fell for the second consecutive month in July and are down 11% for the last year, signaling a major improvement for the U.S. housing market, according to Lender Processing Services. Loans that are 30 days or more past due made up just 7.03% of home mortgages.
The decline in late payments is positive news for the market beleaguered by the foreclosure crisis, with more than 2-million homes in the foreclosure pipeline, LPS data shows. The firm’s figures are gathered from mortgage performance statistics that cover about 70% of the U.S market.
Delinquencies hit a high of 9.37% in October 2009, but have gradually slipped as a result of better employment conditions and an increase in mortgage modifications by some lenders.
Another 3.5-million homes are 30 days or more past due, but not in foreclosure. States with the highest number of late mortgages are some of the hardest hit, including Florida, Nevada, Mississippi, New Jersey and Illinois.
An increase in the volume of short sales approved by lenders is also helping to aid the housing market’s recovery. The nation’s giant mortgage lenders, Fannie Mae and Freddie Mac will allow struggling homeowners who are current on their mortgages to qualify for short sales beginning November 1st.
Underwater homeowners whose loans are guaranteed by Fannie or Freddie could qualify for a short sale under a set of hardship criteria. Borrowers need to be unemployed, under going a divorce, suffer from long term disability or have changed jobs more than 50 miles from their primary residence to qualify.
There’s also another series of tough hardships that will qualify homeowners considering a short sale: a business failure, death of a wage earner or a natural or man made disaster such as a fire or flood in the case of mortgage holders in Louisiana, where Isaac flooded thousands of homes. Short sales are better for mortgage holders than foreclosures since they are able to rebuild their credit and qualify for another mortgage in a shorter period of time.
Homeowners who are behind on their mortgage will also be eligible for the new short sale program. A streamlined process involving less documentation and faster response times on contracts of sale should offer better solutions to the troubled process.