A new analysis suggests that the tide of home foreclosures isn’t going to recede soon.  The report from the Center for Responsible Lending, “Lost Ground, 2011,” finds that at least 2.7 million mortgages loaned from 2004 through 2008, or about 6%, have ended in foreclosure and that nearly 4 million more home loans (roughly 8%) from the same period remain at serious risk.  Put another way, “The nation is not even halfway through the foreclosure crisis,” says the report, which analyzed 27 million mortgages
made over the five years.  Across the country, low- and moderate-income neighborhoods and neighborhoods with high concentrations of minorities have been hit especially hard, the report found.  The report also noted that certain types of loans have much higher rates of completed foreclosures and serious delinquencies. They include loans originated by brokers; hybrid adjustable-rate mortgages, option ARMs, loans with prepayment penalties and loans with high interest rates (subprime). African Americans and Latinos were more likely to receive a high-cost mortgage with risky features, regardless of their credit. For example, among borrowers with good credit (a FICO score of over 660), African-Americans and Latinos received a high-interest-rate loan more than three times as often as white borrowers.

Delinquencies down, foreclosure inventory sets record high

The October Mortgage Monitor report released by Lender Processing Services, Inc. (LPS) shows mortgage delinquencies continue their decline, now nearly 30% off their January 2010 peak. Meanwhile,
foreclosure inventories are on the rise, reaching an all-time high at the end of October of 4.29% of all active mortgages. The average days delinquent for loans in foreclosure extended as well, setting a new record of 631 days since last payment, while the average days delinquent for loans 90 or more days past due but not yet in foreclosure decreased for the second consecutive month.  Judicial vs. non-judicial foreclosure processes remain a significant factor in the reduction of foreclosure pipelines from
state to state, with non-judicial foreclosure inventory percentages less than half that of judicial states.

This is largely a result of the fact that foreclosure sale rates in non-judicial states have been proceeding at four to five times that of judicial. Non -judicial foreclosure states made up the entirety of the top 10 states with the largest year-over-year decline in non-current loans percentages.  The October data also
showed that mortgage originations are on the rise, reaching levels not seen since mid-2010. Mortgage prepayment rates have also spiked, as much of the new origination is related to borrower refinancing; loans originated in 2009 and later are the primary drivers of the increase. While FHA origination activity
is down, GSE and FHA originations still account for the vast majority of all new loans – nearly nine out of every 10 new mortgages.

Jobs up, looks better than it is

Job creation remained weak in the US during November, with just 120,000 new positions created, though the unemployment rate slid to 8.6%, a government report showed Friday.  The rate fell from
the previous month’s 9.0%, a move which in part reflected a drop in those looking for jobs. The participation rate dropped to 64%, from 64.2% in October, representing 315,000 fewer job-seekers.
The actual employment level increased by 278,000. The total amount of those without a job fell to 13.3 million.  The drop in participation rate is significant in that had the labor force remained steady, the jobless rate would have dropped to 8.8%, according to Citigroup calculations. If the labor force had
followed trend growth, unemployment would be at 8.9%.  “Overall, the continued modest employment gains reflect an economy that plods along at an uninspiring pace,” Kathy Bostjancic, director
of macroeconomic analysis at The Conference Board, said in a statement. “These modest job gains are still not enough to propel economic growth to a sustainable 2%-plus growth path.”  The
measure some refer to as the “real” unemployment rate, which counts discouraged workers, also took a fall to 15.6% from 16.2%,its lowest level since March 2009.

However, economists were treating the rate drops with skepticism.  “When the unemployment rate declines, we want to see both employment and participation increase as discouraged workers
return to the labor force. Today, we got the former, but not the latter, making the 0.4% drop look a bit suspect,” Neil Dutta, US economist at Bank of America Merrill Lynch, told clients. “We would not be surprised to see the unemployment rate give back some of its decline in the coming month(s).”  Average earnings were essentially flat, up two cents to $23.18 an hour. Private payrolls increased 140,000, considerably less than a report earlier this week showing that nongovernment jobs were up by more
than 200,000 for the month.  Government payrolls fell 20,000, including a 4,000 drop in federal positions.

Long-term unemployment remains a big problem: The average duration for joblessness surged to a record-high 40.9 weeks.   Stagnation in wages also continues, as more employed workers took
on second jobs. There were just under seven million multiple job-holders for the month, the highest total in 2011 and the most since May 2010.  Traders offered little reaction to the report.
Futures already had been indicating a positive open but lost some ground in the ensuing minutes after the Labor Department report hit the tape.  “At this pace of job growth, it will be more than two decades before we get back down to the pre-recession unemployment rate. Moreover, a shrinking labor force is not the way we want to see unemployment drop,” said Heidi Shierholz, economist at the Economic Policy Institute. “At this rate of growth we are looking at a long, long schlep before our sick
labor market recovers.”

Remember:
All these scary reports create opportunities for the investor no matter where you live.