LPS Mortgage Monitor - January 2013

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LPS Mortgage MonitorFebruary 2013 Mortgage Performance Observations

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February 2013 Mortgage Performance Observations

Data as of January, 2013 Month-end

• Focus 1: Foreclosure pipeline status and update on regional activity

• Focus 2: New problem loan rates and attributes

February 2013 Focus Points

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attributes• Focus 3: Loan origination volumes and

characteristics• Focus 4: HARP activity and performance,

“refinancibility” update

• Foreclosure starts and sales driven by regional processes and compliance; starts increasing after NMS

Focus Point 1: Foreclosure pipeline status and update on regional activity

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• “Time to clear” still multi-year; 42% of loans in foreclosure last year remain in foreclosure

• NV and MA pipeline ratios are extending as “judicial”-like processes are implemented (preview of HOBR in CA?)

FC starts & sales remain volatile due to regional processes and compliance

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National Mortgage Settlmt.

Process Reviews

FHFA Moratoria

Significant pipeline differences linger based on foreclosure process

Foreclosure inventory > 2 years past due

Judicial: 58%Non-judicial: 33%

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Foreclosure sale rates in non-judicial states are over 2x judicial

Foreclosure inventory in judicial states is 3x non-judicial

Status of 2,164k foreclosures from January 2012

•Two-thirds of current

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•Two-thirds of current loans have been modified

•17% of delinquent Loans have been modified

Default pipeline “time to clear” is still extreme in several states

MA was 75 NV was 27

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MA was 75 months

in Jun-12

NV was 27 months

in Jan-12

Some non-judicial state pipelines are growing due to legal or judicial action

Eaton v. FNMA: Lenders have to prove ownership at FC sale

with mortgage and note

NV Assembly Bill 284 requires affidavit prior to

foreclosure

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• New problem loan rates are still high in regions with large numbers of underwater borrowers

Focus Point 2: New problem loan rates and attributes

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• Judicial states have experienced consistently higher rates of new problem loans over the past six months

• 2005-2007 vintages are the primary source of new problem loans

“Sand states” still have high rates of underwater and new problem loans

NV: 45%

FL: 36%

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AZ: 24%CA: 21%

New problem loan rates declining in non-judicial states; stable in judicial

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The majority of new problem loans are from “bubble” vintages

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• Originations remain elevated in December but have not moved significantly higher despite continued rate declines

Focus Point 3: Loan origination volumes and characteristics

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• Credit characteristics for recent vintages are pristine with very low default rates

• Today’s originations have lower risk with higher margins

Originations remain relatively high but signs of “burn-out” persist

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2005 2006 2007 2008 2009 2010 2011 2012

Count 13.1M 11.2M 9.1M 6.7M 8.3M 7.2M 6.4M 8.6M

% Gov 52% 52% 69% 87% 91% 89% 87% 84%

Credit standards have increased for all product; limited availability < 700

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Mortgage originations have lower risk with higher margins

Vintage Credit Score

Original Loan-to-

Value

Non-current at 12th pmt

Spread to Libor 10yr Swaps (bp)

2005 705 74.6% 4.8% 119 Bubble-era loans

Average Origination Characteristics

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2006 699 76.7% 8.7% 1062007 705 77.3% 9.2% 1022008 716 77.8% 7.4% 1762009 737 75.6% 2.9% 1582010 743 75.0% 2.0% 1482011 745 74.4% 1.7% 1642012 747 75.1% 1.5% 199

were risky and margins were tight

Today, loans have better credit and return almost 100bp more

• HARP volumes remain strong; almost a quarter of all originations

• Default rates for HARP are very low

Focus Point 4: HARP activity and performance, “refinancibility” update

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• Default rates for HARP are very low compared to FHA and other high LTV

• Significant HARP as well as traditional refiopportunities remain

HARP activity remains strong, ~30% of GSE originations (22% of total)

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% of all High LTV origCA: 13% FL: 8.3%IL: 5.8% MI: 5.5%

GA: 5.2% AZ: 4.7%

Likely HARP originations* have experienced relatively low defaults

LTVCredit Score Balance

FHA/VA 90% 714 $191k

High LTV GSE 103% 745 $206k

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Other GSE 63% 766 $216k

*GSE loans with greater than 80% Original LTV

Total non-current % for high LTV loans not backed by GSE or FHA is 25% at 12 months

Almost 20% of mortgages have “refinancible” characteristics

An additional 2.6M loans may be eligible for

HARP*

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HARP*

*HARP Eligibility: GSE, Close prior to May-09, Curr LTV >80%, No more than 1 DQ in 12 mos and 0 in 6 mos

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LPS Mortgage MonitorFebruary 2013 Appendix

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Data as of January, 2013 Month-end

January 2013 Data Dashboard

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Seven of the top 10 states for total non-current are judicial

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Average year over year change in non-current percent (includes loans 30+ Delinquent or in Foreclosure)

Judicial = -7.0% Non-judicial = -11.8%

Delinquency and foreclosure rates continue to improve

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LPS Mortgage MonitorDisclosures: Product / Metric Definitions and

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Disclosures: Product / Metric Definitions and July 2012 Market Sizing Revisions

Disclosure Page: Product Definitions

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*Conforming limits do not account for temporary or high-cost area increases.

Disclosure Page: Metrics Definitions

• Total Active Count: All active loans as of month-end including loans in any state of delinquency or foreclosure. Post-sale loans and loans in REO are excluded from the total active count.

• Delinquency Statuses (30, 60, 90+, etc): All delinquency statuses are calculated using the MBA methodology based on the payment due date provided by the servicer. Loans in foreclosure are reported separately and are not included in the MBA days delinquent.

• 90 Day Defaults: Loans that were less than 90 days delinquent in the prior month and were 90 days delinquent, but not in foreclosure, in the current month.

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were 90 days delinquent, but not in foreclosure, in the current month.• Foreclosure Inventory: The servicer has referred the loan to an attorney for

foreclosure. Loans remain in foreclosure inventory from referral to sale.• Foreclosure Starts – Any active loan that was not in foreclosure in the prior month that

moves into foreclosure inventory in the current month.• Non-Current: Loans in any stage of delinquency or foreclosure.• Foreclosure Sale / New REO: Any loan that was in foreclosure in the prior month that

moves into post-sale status or is flagged as a foreclosure liquidation.• REO: The loan is in post-sale foreclosure status. Listing status is not a consideration,

this includes all properties on and off the market.• Deterioration Ratio: The ratio of the percentage of loans deteriorating in delinquency

status vs. those improving.

With the June 2012 month-end data, LPS has updated its extrapolation methodology to incorporate, among other things, improved estimates of market size, which includes higher coverage of government and subprime products and increases LPS’ estimate of the total first lien residential mortgage market by three percent to 50.4 million.

To ensure consistency in trend analysis, the new

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To ensure consistency in trend analysis, the new methodology has been applied to all historical data and previously reported mortgage performance statistics have been adjusted accordingly.

The following section contains information on market coverage and comparisons with previously reported statistics. Additional information is available upon request.

The new scaling increases overall estimated industry loan count by approximately 1.2 million loans

Prior industry estimates declined because scaling didn’t support current servicing transfer volumes

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current servicing transfer volumes

New scaling reflects the higher coverage of government loans and allows for the incorporation of new servicers

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Delinquencies decline based on higher estimated coverage of FHA and subprime loans.

Converge due to new servicers and transfer issues with prior scaling

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Foreclosure inventory remains almost identical, but shifts up in recent months as transfer bias is repaired

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Foreclosure starts remain consistent, withrates shifting up slightly

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Performance Statistics Changes: Database Counts

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Performance Statistics Changes: State Level Detail

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