lps mortgage monitor - july 2013

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LPS Mortgage Monitor

August 2013 Mortgage Performance Observations

Data as of July, 2013 Month-end

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• Focus 1: Prepayment activity and origination update

• Focus 2: Performance by origination year and product

• Focus 3: Delinquency and foreclosure update with product focus

• Focus 4: Property sales with traditional vs. distressed break-out

July 2013 Focus Points

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• Prepayment activity remained strong through July with rates up almost 100 basis points since May

• Prepayment activity in higher LTV cohorts increased in July

• Loan originations had their strongest 12 month period since 2007

Focus Point 1: Prepayment activity and origination update

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Prepayment activity remained strong through July; rates +80 bps since May

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Prepayment activity in “HARP-able” LTVs increased in July

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Loan originations had their strongest 12 month period since 2007

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• Early payment defaults for 2013 vintage are the best on record

• Delinquencies at 12 months of age are a fraction of pre-crisis vintages

• Likely HARP delinquencies are lower than pre-crisis GSE and post-crisis FHA (still 3x that of “traditional” GSE).

Focus Point 2: Performance by origination year and product

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Early payment defaults for 2013 vintage (so far) are the best on record

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Delinquencies at 12 months of age are a fraction of pre-crisis vintages

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Likely HARP DQs are better than pre-crisis GSE and post-crisis FHA

High LTV GSE loans have delinquencies 3x that of “traditional” GSE loans

(0.4% vs. 1.2%)

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• The strong downward trend in delinquencies and foreclosures continues

• Foreclosure starts year to date were the lowest since 2007; almost 50% are repeats

• Delinquency and foreclosure improvement extends across virtually all products

• Over one-third of the delinquent market is Alt-A and Subprime

Focus Point 3: Delinquency and foreclosure update with product focus

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The strong downward trend in DQs and FCs continues

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YTD FC starts lowest since 2007; almost 50% are repeats

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DQ, FC improvement extends across virtually all products

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Over one-third of the delinquent market is Alt-A and Subprime

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• Short sales, as well as overall distressed sales, were down in 2013

• “Sand” states still have among the highest percentage of distressed sales

• Distressed sales volumes do not appear indicative of regional price discounts

Focus Point 4: Home prices and distressed sales transactions

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Short sales, as well as overall distressed sales, were down in 2013

Distressed sales (through Q2)

2011 692k (14% SS)

2012 650k (16% SS)

2013 463k (10% SS)

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“Sand” states still have among the highest % of distressed sales

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Distressed sales volumes are not indicative of regional price discounts

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LPS Mortgage Monitor

August 2013 Appendix

Data as of July, 2013 Month-end

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July 2013 Data Summary

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

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Loan counts and average days delinquent

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LPS Mortgage Monitor

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

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Disclosure Page: Product Definitions

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

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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.

• 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.

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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 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.

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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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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, with rates shifting up slightly

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Performance Statistics Changes: Database Counts

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Performance Statistics Changes: State Level Detail