The height of the 2nd peak depends on the number of foreclosures, and the how quickly the lenders can sell the REOs. The foreclosure-gate related moratoriums have slowed the foreclosure process, but foreclosures will probably pick up again in early 2011. My guess is the 2nd peak will happen in 2011 and be close to the same height as in 2008.
One of the key issues is the number of delinquent loans (and loans in the foreclosure process). I use the Mortgage Bankers Association (MBA) quarterly data and LPS Applied Analytics monthly data to track delinquencies.
Click on graph for larger image in graph gallery.
This graph based on the MBA quarterly data shows the percent of loans delinquent by days past due. The MBA reported that 13.52 percent of mortgage loans were either one payment delinquent or in the foreclosure process in Q3 2010 (seasonally adjusted). This was down from 14.42 percent in Q2 2010.
Most of the decline in the overall delinquency rate was in the seriously delinquent categories (90+ days or in foreclosure process). Part of the reason is lenders were being more aggressive in foreclosing in Q3 (before the foreclosure pause) - hence the surge in REO inventory in the first graphs! Some of the decline was probably related to modifications too.
This graph provided by LPS Applied Analytics shows the percent delinquent, percent in foreclosure, and total non-current mortgages through November.
The percent in the foreclosure process is trending up because of the foreclosure moratoriums.
According to LPS, 9.02% of mortgages are delinquent (down from 9.29% in October), and another 4.08% are in the foreclosure process (up from 3.92% in October) for a total of 13.10%.
With falling house prices, the delinquency rate could start rising again since more homeowners will have negative equity. However just because a homeowner has negative equity doesn't mean they will default. It usually takes another factor such as loss of employment, divorce, or a medical emergency for the homeowner to default.
On the other hand, an improving labor market will help push down the delinquency rate. My guess is the overall delinquency rate has peaked, although I expect the delinquency rate to stay elevated for some time.
Ten Questions:
• Question #1 for 2011: House Prices
• Question #2 for 2011: Residential Investment
• Question #3 for 2011: Delinquencies and Distressed house sales
• Question #4 for 2011: U.S. Economic Growth
• Question #5 for 2011: Employment
• Question #6 for 2011: Unemployment Rate
• Question #7 for 2011: State and Local Governments
• Question #8 for 2011: Europe and the Euro
• Question #9 for 2011: Inflation
• Question #10 for 2011: Monetary Policy
""A total of 78,955 U.S. properties received default notices (NOD, LIS) in November, a 21 percent decrease from the previous month and a 31 percent decrease from November 2009 — the 10th straight annual decrease in default notices. November’s default notices total was the lowest since July 2007. ""
DEFAULT NOTICES, administrative 3 months mandatory paper trail, properly 'served' to meet stage one Legal Requirements...
November 2010 lowest since July 2007 thats 3 years and 5 months = 41 months
so finally exhausted the continued monthly supply of about 80,000 defaulting type house buyers, 3.28 million defaulters
SINCE THE TAIL END CHARLIES finally 'evicted' is/has been at 95,000 / month...(why MORE..hum) ANYWAY, FOR SURE ALL 100% OF THE DEFAULTERS SEEM TO BE CONTINUING TO NOT PAY..remaining rent free during the judicial cycle from default to final eviction...
How Long on average ? 12-24 months per house rent-free? pure guess.. another guess is therrefore HOW MUCH 'TAKE HOME ADDITIONAL SPENDING MONEY IS IT @ 24 months and say $1500/month (very modest estimate, low end). and 3.28 million 'beneficiaries' over the 41 months thus far...
Well, a NICE SOLID $36,100 per household ....11.75 x 10 (6+4) => 11.75 tens of billions..=>.$117.50 BILLION boost to the USA economy, spread over 41 months, very very good...
Another pure guess is IF the US IRS will make an Administrative Final Decision regards the tax status of the UNPAIDFORGIVEN DEBTS on those mortgages...
You see, of course, that for every Bank Tax deduction for 'written off mortgage-debt', that same EQUAL amount of "DEBT FORGIVEN MUST BE TAXED", against the 'beneficiary...shall it be 'short term' or 'long term' windfall income?,
and under what special payment terms shall the IRS allow the money-due to be paid...probably the short term mode = 35% average for blue collar workers, spread over 2 years of the estimated $36,100 / household finally evicted, about $12,600 'back taxes due'
and for non-citizens, non-payment could result in deportation/refusals to renew VISAs and all THAT...right?
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