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CONFERENCE REPORT: SHADOW INVENTORY FALLS CALENDAR PLACES TO BE THIS MONTH 34% FROM 2010 PEAK JULY 31 – AUGUST 3 Florida Association of Mortgage Professionals Annual Convention ROSEN'S SHINGLE CREEK ORLANDO, FLORIDA Contact: 202.862.5853 Online: FAMB.ORG AUGUST 4 - 6 CMBA 18th Annual Western States Loan Servicing Conference ENCORE AT THE WYNN LAS VEGAS LAS VEGAS, NEVADA Contact: 916.446.7100 Online: CMBA.COM AUGUST 6 - 8 Market Navigator Series: Raising Institutional Capital SAN FRANCISCO MARRIOTT MARQUIS SAN FRANCISCO, CALIFORNIA Contact: 925.244.0500 Online: CVENT.COM AUGUST 6 - 9 24th Annual Regulatory Conference SHERATON DENVER DOWNTOWN DENVER, COLORADO Contact: 202.521.3999 Online: AARMR.ORG AUGUST 14 - 16 Single Family Housing Investment Conference PARADISE POINT RESORT SAN DIEGO, CALIFORNIA Contact: 702.998.3800 Online: FICONEVENTS.COM SEPTEMBER 8 - 10 The 10th Annual Five Star Conference and Expo HILTON ANATOLE DALLAS, TEXAS Contact: 214.525.6766 Online: FIVESTARCONFERENCE.COM 14 Fewer than 2 million homes remained part of the industry's shadow inventory as of April, CoreLogic reported last month. That total puts shadow inventory at a supply of 5.3 months and represents an 18 percent year-overyear decrease. The data provider also reported shadow inventory is 34 percent lower than the 2010 peak of 3 million. For its estimate, CoreLogic counts unlisted properties that are seriously delinquent, in foreclosure, or held as REOs as part of shadow inventory. Currently, serious delinquencies make up the bulk of shadow inventory. According to CoreLogic, out of the total number of properties in the shadows, about 890,000 homes are seriously delinquent, 761,000 are in some stage of foreclosure, and another 336,000 are REOs. However, serious delinquencies, or mortgages past due by 90 days or more, are trending downward, falling to under 2.3 million in May, which represents 5.6 percent of the nation's outstanding mortgages. "The stock of seriously delinquent homes, which is the main driver of shadow inventory, is at the lowest level since December 2008," said Dr. Mark Fleming, chief economist for CoreLogic. "Over the last year it has decreased in 42 states by double-digit figures, resulting in rapid declines in shadow inventory for the first quarter of 2013." The number of homes in some stage of foreclosure totaled 1 million in May, down 29 percent from a year earlier and down 3.3 percent from the previous month. As a percentage, foreclosure inventory represents 2.6 percent of mortgages, down from 3.5 percent in May 2012. Completed foreclosures also experienced a steep annual decrease, falling to 52,000 in May, down 27 percent from a year earlier when completed foreclosures totaled 71,000. The state that accumulated the most completed foreclosures during the last year was Florida, where 103,000 homes have been lost to foreclosure. DELINQUENCIES SEE BIGGEST YEAR-TO-DATE DROP IN 12 YEARS Delinquencies saw the steepest year-to-date drop since 2002 in May as new problem loan rates inched toward pre-crisis lows, according to Lender Processing Services' (LPS) Mortgage Monitor report released last month. Since the end of December 2012, the delinquency rate has fallen by more than 15 percent to 6.08 percent in May. "Though they are still approximately 1.4 times what they were, on average, during the 1995 to 2005 period, delinquencies have come down significantly from their January 2010 peak," said Herb Blecher, SVP of applied analytics at LPS. Delinquencies on prime and nonprime loan products have plummeted 43 percent from the 2010 peak, according to LPS. "In large part, this is due to the continuing decline in new problem loans—as fewer problem loans are coming into the system, the existing inventories are working their way through the pipeline," he added. At 0.73 percent, the rate for new problem loans now reflects annual averages seen from 2005 to 2006. And, the rate is approaching 2000 to 2004 levels, when the rate averaged 0.55 percent. LPS also reported the foreclosure inventory rate, which stood at 3.05 percent in May, is 5.7 times above the 1995 to 2005 average. On the upside, the foreclosure rate on prime and nonprime loan types is still down by 20 percent from the January 2010 peak. Negative equity has also seen a dramatic fall, but continues to adversely impact new problem loan rates, according to LPS. "As we've noted before, negative equity appears to still be one of the strongest drivers of new problem loans, and—primarily buoyed by home price increases nationwide—that situation also continues to improve," Blecher added. Home prices, which increased 8 percent yearover-year in April, have brought down the rate of loans in negative equity to under 15 percent, LPS reported. Currently, the national equity rate is at 14.7 percent, which translates into 7.3 million loans and represents a 47 percent annual decrease. Certain states continue to struggle with a high share of underwater loans. In Nevada and Florida, the rate is more than double the national averages, at 32.7 percent and 29.8 percent, respectively. KNOW THIS As of June, the Federal Reserve held $1.24 trillion in agency debt and mortgage-backed securities.