NEW YORK--(BUSINESS WIRE)--Link to Fitch Ratings' Report: Residential Mortgage Market Index -- U.S.A. 1Q15
The length of time it takes to liquidate a distressed mortgage may finally be reaching a turning point, according to Fitch Ratings in its latest quarterly index report.
The average amount of time it took to liquidate a distressed loan rose again in the first quarter, to 42 months. This is nearly three times the average time to liquidate a loan between 1999 and 2006 (15 months).
However, while timelines on liquidated loans continue to increase, there are signs that the pace may soon begin to slow. Among loans still in foreclosure, the average amount of time since making a payment has begun to plateau. While still increasing modestly, the rate of increase over the last two quarters has been the lowest since 2008.
'The timeline-to-date trends of loans in the pipeline could be a bellwether of a turnaround in liquidation timelines in the medium term' said Sean Nelson, Director at Fitch. Liquidation timelines are expected to continue to increase in the short term, as average pipeline timelines still exceed observed timelines on loans that have liquidated.
The elevated timelines seen during the past few years have kept loss severities at historical highs despite the benefit of recent home price gains. 'The increased costs associated with extended foreclosures have led to higher losses incurred at liquidation', said Nelson. When liquidation timelines begin to fall, loss severities should see a meaningful retreat from their current levels.
Fitch's index is published quarterly and highlights performance trends in legacy and new issue RMBS, house price conditions and mortgage market developments. Fitch's Liquidation Timeline index measures the average number of months between last payment and liquidation among liquidated U.S. private label, securitized mortgage loans.
The Mortgage Market Index - U.S.A. is part of Fitch's quarterly structured finance index reports. It is available at 'www.fitchratings.com' or by clicking on the above link.
Additional information is available at 'www.fitchratings.com'.