Rising foreclosure rates to impact home prices, Fitch says
Rising foreclosure start rates will add to the distressed property inventory and drive home prices further down, according to a report from Fitch Ratings, reflecting the impact of last year’s robo-signing scandal.
More than 10% of severely delinquent loans in private-label residential mortgage-backed securities are now moving into foreclosure each month, the ratings agency said. That’s nearly double the rate from a year ago when the moratoria instituted by lenders and servicers in the wake of the robo-signing debacle were in place. It’s also edging closer to the 14% rate seen between 2000 and 2010.
Fitch said home prices will likely dip another 10% before they stabilize, due to an increasing inventory of distressed homes. Home prices dropped 1.1% in September from August and 4.1% from a year ago, according to a CoreLogic (CLGX: 13.75 +2.15%) report Monday.
“Rising foreclosure start rates are likely a sign that servicers are playing catch-up on actions that have been delayed over the past year,” Fitch Managing Director Diane Pendley said in the report. “Mortgage servicers now generally feel they have implemented the corrective actions that they determined were needed.”
Foreclosures are taking an average of eight months to close in nonjudicial states and 15 months in judicial states, bogged down by loss mitigation, a foreclosure backlog and weak housing demand.
The foreclosure rate nearly doubled on borrowers delinquent for more than six months, while the rate increased about 25% on borrowers who have missed between three and six payments.
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