According to latest data from LPS [Lender Processing Services] the total number of distressed loans in just floating out there is over 7 MILLION.  So, everyone celebrating piece meal reports about delinquency decreases, increased pending home sales, and foreclosure inventories…hold your horses. Stabilization is not here yet.

LPS goes on to report that for every one loan that improves its delinquency status, two loans are headed for hell in a hand basket. Loans improving from delinquent to cured is at a 3 month low.

Positive notes remaining: New start delinquencies have declined, but if you look at the last twenty years, they are at historical highs.  Loans at the foreclosure stage of delinquency have declined almost 3% from nearly 4.19 million loans in March to a little over 4.07 million loans by the end of April.

However, one in seven of the 52 million households in the U.S. are somewhere between having missed a payment and eviction.

The highest number of mortgage delinquencies are now coming from prime mortgages.  Borrowers with subprime loans, who defaulted due to their inability to handle the rise in payments when their loans reset are being replaced by prime borrowers who have lost the ability to pay due to job loss.  In fact, the delinquency rate is improving in the sand states where the boom took roots and is now increasing in states hit the hardest by the poor job market…i.e. Michigan, Rhode Island, Illinois.

Stabilization?  Not yet.  Delinquency and foreclosure rates are much higher than the same time last year.  Delinquencies are up 10.7% over last year and foreclosures are up 20.4% over last year.  So, don’t give a lot of weight to month to month decreases.

Time for short sales!!!