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Mortgage originations plunged 10.1 percent from November to December, continuing a decline from 2011's September peak. At the same time, loans originated over the last two years have proved to be some of the best quality originations on record.

Mortgage Originations Decline 10 Percent but Quality Soars

Mortgage originations plunged 10.1 percent from November to December, continuing a decline from 2011′s September peak. At the same time, loans originated over the last two years have proved to be some of the best quality originations on record.

New originations ended the year down 29.3 percent from 2010, lower than since 2007, and December activity was down 2.7 percent from December 2010. Through November, originations totaled about 5.6 million, down 1 million from 2010, according to the December Mortgage Monitor report released by Lender Processing Services today.

Mortgages originated in 2010-11 have 90-day default rates that were lower than any vintage since 2005, before the housing crash and the implementation of tighter underwriting standards. Ninety day default rates are highest for loans originated in 2006, immediately before lending standards were tightened, and are lowest for loans originate in 2010 and 2011.

December origination data also shows that recent prepayment activity – a key indicator of mortgage refinances – has remained strong, with 2008-09 originations, high credit score borrowers and government-backed loans having benefited the most from recent, historically low interest rates.

Foreclosure starts plummeted in 2011, nearly 40 percent below 2010 for the year as a whole and down 3.7 percent from November to December.

LPS found that half of all loans in foreclosure in judicial states have not made a payment in more than two years. Foreclosure inventories in judicial states are two anmd a half times those in non-judicial states, and the gap continues to widen. Foreclosure sale rates in non-judicial states stood at approximately four times that of judicial foreclosure states in December.

However, pipeline ratios (the time it would take to clear through the inventory of loans either seriously delinquent or in foreclosure at the current rate of foreclosure sales) have declined significantly in judicial states from earlier this year.

Other findings from the LPS report:

Total U.S. loan delinquency rate: 8.15 percent

Month-over-month change in delinquency rate: 0.0 percent

Total U.S foreclosure pre-sale inventory rate: 4.11 percent

Month-over-month change in foreclosure pre-sale inventory rate: -1.3 percent

States with highest percentage of non-current* loans: FL, MS, NV, NJ, IL

States with the lowest percentage of non-current* loans: MT, WY, SD, AK, ND

*Non-current totals combine foreclosures and delinquencies as a percent of active loans in that state.

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