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HOPE NOW Reports 25 Percent Month-Over-Month Drop in Foreclosure Starts

Jun 01, 2011

HOPE NOW has announced the release of its April 2011 mortgage industry data, which estimates declines in foreclosure sales, foreclosure starts, and modification activity for the month of April. Foreclosure starts nationwide were approximately 163,000, down from 217,000 in the month of March, a decrease of 25 percent. Completed foreclosure sales dropped to 73,000 for April, compared with 85,000 in March, representing a decrease of 14 percent. For the month, permanent proprietary loan modifications for homeowners were 57,000, down from 77,000 in March, representing a 26 percent decline. However, characteristics of these completed modifications remained strong—approximately 47,000 (82 percent) had reduced principal and interest payments, 45,000 (78 percent) had fixed interest rates of five years or more, and 30,000 (53 percent) had reduced principal and interest payments of 10 percent or greater. These modifications include Fannie Mae, Freddie Mac, Federal Housing Administration (FHA), the U.S. Department of Veterans Affairs (VA) and others not modified under the Home Affordable Modification Program (HAMP). Additionally, HOPE NOW’s April data showed that, over a 12-month period, recidivism of proprietary loan modifications has averaged 80 percent of the borrowers performing, meaning that approximately 20 percent of homeowners have re-defaulted after 90 days. This metric was slightly higher in April at 81 percent performing and 19 percent re-defaulting after 90 days. Data on recidivism is based on loans that have performed satisfactorily for at least six months prior to default and includes loans modified up to 18 months ago. “The characteristics and performance of proprietary loan modifications have remained steady as we view this month’s data. Performance has remained strong in the areas of principal and interest payment reduction, fixed rate offerings and recidivism," said Faith Schwartz, executive director of HOPE NOW. "This includes FHA, Fannie Mae, Freddie Mac and private loan modifications that fall outside of HAMP modifications. We are particularly encouraged by stable trends in recidivism, or re-defaults, on loan modifications. Our data shows that permanent proprietary loan modifications remained less than 90 days past due for 80 percent of the modifications, based on data reported from May 2010 to April 2011." The April HOPE NOW data does not yet include loan modifications done under the Home Affordable Modification Program (HAMP), which have not been reported for the month. Some of the highlights of the April 2011 data: Loan modifications ►Proprietary modifications for the month were approximately 57,000, down from 77,000 in March—a decrease of 26 percent. Loan modification characteristics ►Loan modifications with reduced principal and interest payments accounted for approximately 82 percent (47,000) of all proprietary modifications. ►Loan modifications with reduced principal and interest payments by 10 percent or greater accounted for approximately 53 percent (30,000) of all proprietary modifications. ►Fixed-rate modifications (initial fixed period of five years or more) accounted for 78 percent (45,000) of all proprietary modifications. Loan modification performance ►Proprietary loan modifications with 90-plus day delinquency (recidivism) represented 19 percent (240,000) of active modification inventory, which was unchanged from the month of March. Foreclosures ►Foreclosure starts for the month were 163,000, down from the 217,000 reported for March 2011—a decrease of 25 percent. ►Completed foreclosure sales for the month were approximately 73,000, down from the 85,000 from March 2011—a decrease of 14 percent. Delinquencies ►60-plus days delinquencies remained relatively flat for the month at 2.69 million, compared to 2.63 million reported in March 2011, an increase of two percent.
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