Banks Build Record Foreclosure Inventory

The pace of foreclosure starts increased by a third in March, building the national inventory of REO properties to an all-time high of 2.2 million at the end of the month.

Fortunately, foreclosure sales also increased and delinquencies continued to decline, suggesting the foreclosure glut will be temporary. Delinquencies dropped by more than 11 percent from February, the lowest level since 2008 and a 20 percent year-over-year decline, according to the March Mortgage Monitor report by Lender Processing Services, Inc.

Early-stage delinquencies have led the decline, as fewer problem loans enter the pipeline. In fact, 30-day and 60-day delinquent inventories are now approaching pre-crisis levels. Also, the first quarter of virtually every year shows a drop in new delinquencies, and historically March is consistently the month with the largest declines.

The report also found that mortgage origination activity continues to be slow, primarily due to ongoing reduction in refinance activity. As interest rates rise and credit requirements remain more exacting, the majority of homeowners eligible to refinance may have already done so.

States with highest percentage of non-current loans are Florida, Nevada, Mississippi, New Jersey and Georgia. The lowest percentage of non-current loans are in Montana, Wyoming, Alaska, South Dakota and North Dakota.