Foreclosure starts at 18-year low as loan performance trends higher

Mortgage performance continued to strengthen in August according to a first look at the month’s data from Black Knight.

Foreclosure starts hit an 18-year low of 36.2K, representing a 23% drop year-over-year; and the total number of loans in active foreclosure (253K) was the smallest since 2005.

The total number of properties that are 30 or more days past due or in foreclosure was up 1,000 (3.20%) to 2,066,000 (1.81%).

There was also a strong year-over-year rise in prepayment activity – up 62% - which was 5% higher than July and 2.5 times the 18-year low seen in January.

And this is likely to be surpassed as the 30-45 day closing window means that prepayment activity reflects June-July interest rates, before the subsequent cuts that are likely to boost activity.

Although the number of loans that were 30 or more days past due rose by 6,000, the growth in mortgage loans in August meant that the overall national delinquency rate improved slightly (by 0.15% month-over-month and 1.49% year-over-year) to 3.45%.

Best, worst performing states

The states with the highest share of non-current loans is led by Mississippi at 10.31% and includes Louisiana (7.71%), Alabama (6.67%), West Virginia (6.33%), and Arkansas (6.08%).

The states with the lowest share of non-current loans is led by Colorado (1.75%) and includes Oregon (1.85%), Washington (1.92%), Idaho (2.00%), and California (2.02%).