LPS' July Mortgage Monitor Report: Foreclosure Starts Increase; Late-Stage Delinquencies Lead Rise

/PRNewswire/ -- The July Mortgage Monitor report released by Lender Processing Services, Inc. (NYSE:LPS) shows that foreclosure starts are on the rise, with seriously delinquent loans - those six or more months delinquent - dominating new foreclosure actions.

The increase in foreclosure starts is consistent with the Department of Treasury's latest report that approximately half of all Home Affordable Modification Program (HAMP) trial modifications resulted in cancellation, though 45.4 percent of those have resulted in alternative (non-HAMP) modifications.

Delinquent and foreclosure inventories continue to stabilize but have yet to show annual declines. Continuing the trend from June, agency prime loans have seen the greatest month-over-month increase in foreclosure inventory and the second highest percentage increase since January 2009. Only non-agency jumbo prime loans have experienced a greater increase during the same period, but the month-over-month results indicate that this inventory has begun to decline.

The report also shows that approximately 895,000 loans that were current at the beginning of January are at least 60 days delinquent or in foreclosure as of the end of July - a month-over-month increase of 120,000 loans. Cure rates remain steady overall, but seriously delinquent cures have declined significantly, by approximately 25 percent, which is consistent with the decline in permanent modifications established during the month of July.

Other key results from LPS' latest Mortgage Monitor report include:

           Total U.S. loan delinquency
           rate:                           9.33 percent
           Total U.S. foreclosure
           inventory rate:                 3.75 percent
           Total U.S. non-current* loan
           rate:                           13.08 percent
           States with most non-current*    Florida, Nevada, Mississippi,
           loans:                           Georgia, Arizona
           States with the fewest non-      North Dakota, South Dakota,
           current* loans:                  Alaska, Wyoming, Montana

  *Non-current totals combine foreclosures and delinquencies as a
   percent of active loans in that state.
  Note: Totals based on LPS Applied Analytics' loan-level database of
   mortgage assets.

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Fannie Mae Clarifies Undisclosed Liabilities Policy

/PRNewswire/ -- Fannie Mae (OTC Bulletin Board: FNMA) today issued Selling Guide Announcement SEL-2010-11, which clarifies that lenders are not required to obtain a second credit report just before loan closing. Rather, Fannie Mae is reminding lenders to have processes in place to facilitate borrower disclosure of changes in financial circumstances throughout the origination process.

"This is an important update, because every mortgage loan delivered to Fannie Mae has to be underwritten to establish that the borrower is able to repay the debt," said Deborah Slade-Horsey, Vice President for Single-Family Risk Policy. "Our primary objectives are to support borrowers' ability to sustain homeownership and to strike a reasonable balance between requirements that may reduce loan repurchases and requirements that might over-burden lenders' origination processes."

The updated policy reminds lenders that Fannie Mae expects them to have processes in place to facilitate borrower disclosure of changes in financial circumstances throughout the origination process. It also provides an expanded debt-to-income (DTI) ratio tolerance that will lead to fewer loans having to be re-underwritten.

Lenders will only be required to re-underwrite a loan after the initial underwriting decision has been made if the borrower discloses or the lender discovers changes that cause the debt-to-income (DTI) ratio to exceed 45% or to increase by 3 percentage points or more.

Fannie Mae exists to expand affordable housing and bring global capital to local communities in order to serve the U.S. housing market. Fannie Mae has a federal charter and operates in America's secondary mortgage market to enhance the liquidity of the mortgage market by providing funds to mortgage bankers and other lenders so that they may lend to home buyers. Our job is to help those who house America.

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