Study Finds QRM Could Have Impacted 50 Percent of All Mortgages Since 2005

The June Mortgage Monitor report released by Lender Processing Services Inc. (LPS) shows that, while still down 16.4 percent from the start of the year, foreclosure starts increased by more than 10 percent in June 2011. Delinquencies were also up, but incrementally, showing a 2.4 percent increase over May. As of the end of June, 4.1 million loans were either 90-plus days delinquent or in foreclosure, representing a 12.8 percent increase since June 2010. Foreclosure timelines continue their upward trajectory, with the average loan in foreclosure having been delinquent for a record 587 days. More than 40 percent of 90-plus day delinquencies have not made a payment in more than a year. For loans in foreclosure, 35 percent have been delinquent for more than two years. LPS also examined historical data to estimate the potential impact of the proposed Qualified Residential Mortgage (QRM) provision of the Dodd-Frank Act. The data shows that, since 2005, nearly half of all loans originated in the United States could have been ineligible under QRM. At the same time, LPS found that the potential impact of the Federal Housing Finance Agency (FHFA) high-cost conforming limit expiration would be minimal, accounting for only one percent of originations over the last three years. Looking at the differences between judicial and non-judicial foreclosure states, the LPS data shows that the foreclosure pipeline ratio—that is, the number of loans either 90-plus days delinquent or in foreclosure divided by the six-month average of foreclosure sales—is more than three times as high for judicial foreclosure states. Additionally, the slowdown associated with foreclosure moratoria has been almost exclusively felt in judicial states. Other key results from LPS' latest Mortgage Monitor report include: ►Total U.S. loan delinquency rate: 8.15 percent ►Month-over-month change in delinquency rate: 2.4 percent ►Total U.S foreclosure pre-sale inventory rate: 4.12 percent ►Month-over-month change in foreclosure pre-sale inventory rate: 0.2 percent ►States with highest percentage of non-current* loans: FL, NV, MS, NJ, IL ►States with the lowest percentage of non-current* loans: MT, WY, AK, SD, ND *Non-current totals combine foreclosures and delinquencies as a percent of active loans in that state.