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Less Than 1 Percent of Today’s Mortgages are Bad

by Peter Thomas Ricci

The housing market cannot truly recover without a healthy mortgage market, but new research from LPS shines an optimistic light on the topic.

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Homes sales are up, inventory has stabilized, and by many accounts, new construction it putting up its best numbers in the post-boom housing market. And now, the latest study by Lender Processing Services (LPS) has shown that slowly and gradually, we can add another notch to the housing recovery belt: a healthy mortgage market.

Most notably, LPS found that only 0.84 percent of new loans are considered “problem loans,” meaning, seriously delinquent loans that were current six months ago. That’s the lowest level for problem loans since 2007, and the problem-loan rate is now nearing the pre-boom levels of 0.55 percent.

True, the mortgage markets are not fully recovered, what with a 6.59 percent delinquency rate (the historical average is more around 3 percent); however, there was much to like in LPS’ Mortgage Monitor, which studied more than 40 million residential mortgage loans through the month of March. Herb Blecher, LPS’ Applied Analytics senior vice president, said equity has shown particular improvement.

“The overall equity trend has been a very positive one,” Blecher said. “LPS’ latest data shows that the share of loans with LTVs greater than 100 percent has fallen 41 percent from a year ago.”

But of course, LPS’ Mortgage Monitor contained many other stats, the most important of which are collected in our infographic below:

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