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At least half of distressed mortgages cleared, but still a ways to go [ClearOnMoney]
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At least half of distressed mortgages cleared, but still a ways to go

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Commentary

At least half of distressed mortgages cleared, but still a ways to go

23 Jul 2013 by Jim Fickett.

I follow two sources on distressed mortgages, the Mortgage Metrics report from the Office of the Comptroller of the Currency, which overseas national banks, and the Foreclosure Prevention report from the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac. Both of these reports are quarterly. Neither covers the full mortgage market, but each covers roughly half the market, and together I think they give a pretty clear picture of the overall state of things.

Here is the distressed loan data from the OCC (all data in this post are through Q1 of 2013):

The peak was about 4 million distressed loans and we are now back down to about 2 million. Of course the count will never go to zero but, since the mortgage crisis was already well under way when in 2008, where these data start, the count will probably go down well below the starting point of the graph. This suggests we are more than halfway back to a normal market, but still have quite a ways to go.

And here are the data from Fannie and Freddie:

These data also support the conclusion drawn above.

The rate of home forfeitures seems to be in a declining trend, probably because rising house prices are allowing some owners to escape a distressed mortgage via a normal sale rather than a distressed sale.

Although house prices have been rising lately, the remaining large backlog of distressed mortgages will continue to be somewhat of a damper, and I do not expect house prices to rise particularly strongly.