Completed Foreclosure and Seriously Delinquent Mortgage Loans Increase
December 28, 2011 – (RealEstateRama) — Superintendent Lloyd P. LaFountain III announced this week that the Bureau of Financial Institutions’ third quarter survey covering first residential mortgage loans held by Maine’s 32 state-chartered banks and credit unions continued to show mixed performance. As such, there still is no clear trend or indication that the bottom has necessarily been reached.
Favorable indicators included significant decreases in both foreclosure starts and early stage delinquencies (past due less than 90 days), and a slight increase from the second quarter in new mortgage loan starts. Completed foreclosures and serious delinquencies (past due 90 days or more), however, increased. Overall, there was a nominal decrease in the number of mortgages in process of foreclosure. At this time, foreclosure activity does not pose a threat to the stability of Maine-chartered financial institutions.
The Bureau has been surveying the 32 state-chartered banks and credit unions regarding foreclosure activity on a quarterly basis since October 2006. The most recent data covers July through September 2011. Recent changes in the survey have resulted in some temporary incomplete data, primarily an understatement of outstanding first mortgages, which should be corrected in the fourth quarter survey. The data is limited to the 32 financial institutions that have been state-chartered from the end of 2006 through September 2011. It does not include data from entities not regulated by the Bureau, such as federally-chartered banks, federally-chartered credit unions and mortgage companies licensed to do business in Maine.
According to the survey results, the 32 state-chartered financial institutions held more than 51,000 first mortgage loans. There were 319 first mortgages in process of foreclosure (IPF), or one loan for every 161 first mortgages. At the end of the second quarter of 2011, 322 loans were in IPF status. There was a net increase in first mortgage IPF, adjusted for foreclosures, of 39 in the third quarter. This compares very favorably to a net increase of 54 in the second quarter and 94 in the first quarter; the net increase in the third quarter was the second lowest in the last ten quarters.
As a percentage of first mortgages, IPF loans remain relatively low, 0.62% at the end of the third quarter (down slightly from 0.64% at the end of the second quarter of 2011). The number of mortgages that dropped out of IPF for a reason other than completed foreclosure (e.g., a short sale, loan brought current or restructured) decreased slightly from the high reached in the previous quarter, but the ratio (of non-FC drop-outs to IPF) remains significantly higher (favorable) than the average for the prior five quarters. While a number of factors contribute to this number/ratio, it is viewed as an indicator of the institutions’ willingness to work with borrowers to minimize foreclosures.
During the third quarter of 2011, foreclosure proceedings were started on 80 first mortgages, 0.16% of all outstanding first mortgages, or one for every 642 first mortgages. This represents a decrease of 22 from the number initiated in the previous quarter. As a percentage of seriously delinquent first mortgages (at prior quarter-end), the percentage of foreclosure starts in the third quarter dropped slightly, to 15%, from the 18% average of the prior three quarters. Approximately one of every six seriously delinquent mortgages entered the foreclosure process in the third quarter.
The Bureau also requests data on completed foreclosures (FC). After steadily increasing each year since 2006, the number of FC has declined modestly each quarter in 2011 compared to the same period last year. Overall, total FC are down 11% year-to-date compared to the same period last year. Prior to the increase in the third quarter, FC had declined for three consecutive quarters. Further, notwithstanding the increase, the third quarter number of FC is lower than all but one quarter of 2010. Overall, FC remain elevated, but the number also remains low in relation to the total of outstanding mortgages – only one for every 1,195 first mortgages.
More information on the status of residential real estate lending by Maine’s financial institutions is available in the Bureau’s 2011 Annual Report to the Legislature, which can be found at www.maine.gov/pfr/financialinstitutions.