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» VISIT US ONLINE @ DSNEWS.COM 45 BLACK KNIGHT: 1 IN 10 BORROWERS UNDERWATER In Black Knight Financial Services' latest Mortgage Monitor Report, the company found that only one in 10 Americans is underwater, down from one in three in 2010. Overall, the company's look at March data reflected a shifting landscape. As home prices have risen over the past two years, many distressed loans have worked their way through the system and the percentage of Americans with negative equity has declined considerably. e company noted that 55 percent of loans in foreclosure have been delinquent for more than two years. "Two years of relatively consecutive home price increases and a general decline in the number of distressed loans have contributed to a decreasing number of underwater borrowers," said Kostya Gradushy, Black Knight's manager of loan data and customer analytics. "Looking at current combined loan-to-value [CLTV], we see that while four years ago 34 percent of borrowers were in negative equity positions, today that number has dropped to just about 10 percent of active mortgage loans," Gradushy said. Gradushy references the 10.1 percent negative equity average, but what states homeowners reside in paint a clearer picture of negative equity across the spectrum. Judicial states have a higher negative equity rate at 13.4 percent, compared to the 7.9 percent rate experienced in non-judicial states. Regardless, Gradushy notes that both judicial and non-judicial states have experienced declines. "Overall, nearly half of all borrowers today are both in positive equity positions and of strong credit quality—credit scores of 700 or above. Four years ago, that category of borrowers represented over a third of active mortgages," Gradushy said. Loans, on average, are in foreclosure for 966 days. e total delinquency rate is 5.37 percent, the lowest since October 2007, according to Black Knight. Month-over-month, delinquency rates have declined to 7.57 percent and were down yearly 16.29 percent in March. e total U.S. foreclosure pre-sale inventory stands at 2.07 percent, the lowest figure since October 2008. Inventory rates are down 36.69 percent year-over-year. Black Knight had more positive news in its Mortgage Monitor Report: Leading indicators, such as foreclosure starts, new problem loan percentage, 90-day defaults count, and 30 to 60 roll count were all down heading into the second quarter. e company offered that the 2013 population of loans was "the best vintage on record," but the statement belies the fact that higher credit restrictions severely hampered new originations for lower-credit borrowers. e top five states with the highest total non-current loans were Mississippi (13.4 percent), New Jersey (12.9 percent), Florida (12.1 percent), New York (11.1 percent), and Maine (10.6 percent). Excluding Mississippi, the remaining four states are judicial states, suggesting the longer timelines required to resolve foreclosures are impacting non-current loan rates, depressing the market's ability to quickly clear the remaining backlog in the foreclosure pipeline. NAMFS CRITIQUES FHFA OIG REPORT ON PROPERTY INSPECTIONS e National Association of Mortgage Field Services (NAMFS) recently issued a critique of an audit performed by the Federal Housing Finance Agency's Office of the Inspector General (FHFAOIG). NAMFS doesn't believe that the report properly assessed the more than 15 million inspections done each year in the United States. e audit was initially done to assess the quality of assurance the FHFA has in place to mitigate risk and fraud. e audit posed questions about the quality and veracity of inspections, offering examples of manipulated, inaccurate, and incomplete inspection results as wholly representative of the work performed by the mortgage field services industries. e NAMFS, however, offers a different view of the report. In a release, the organization commented that "the 12 loan servicers reviewed for the audit ordered over 15 million pre-foreclosure property inspections during 2011 and 2012; of these 15 million inspections, the audit report examined 84, or 0.0000056 percent." Furthermore, the group said, "e OIG audit bases its analysis of quality control requirements for pre-foreclosure inspection processes on information drawn from the enterprises' records and on inspections from the quality control files of 12 of the top loan servicers. is provides a very small pool of inspections drawn from quality control files that typically collect questionable inspection results." e group also noted that auditors performed field work at Fannie Mae and Freddie Mac and the offices of loan servicers and never mentioned whether auditors conducted field work at the offices of the mortgage field services providers. "By performing field work at the offices of mortgage field services providers, the auditors would have been able to gather information on the quality control methods used prior to releasing inspection results to loan servicers," the group said. NAMFS cites initial comments from the FHFA that pointed out problems with the OIG report. e FHFA said it "does not believe that the report findings and the examples of deficiencies provide compelling support for the imposition of uniform standards and processes for all pre-foreclosure inspections of properties that collateralize delinquent loans held or guaranteed by the enterprises." e NAMFS commented that there have been quality control processes in place for a long time, and believes that understanding the processes, training, legislative requirements, and the quality control measures involved in pre-foreclosure inspections by mortgage field servicers is important. "e National Association of Mortgage Field Services would like to take this opportunity to open a solution-focused dialogue about the mortgage field services industry," said Eric S. Miller, executive director of NAMFS. Roughly 35 percent of residential properties in the foreclosure process have positive equity, according to RealtyTrac. KNOW THIS

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