Mortgage Default Rate Spikes In June: LPS

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NEW YORK (TheStreet) -- The national mortgage delinquency rate rose sharply in June, after declining for five consecutive months, according to a "First Look" mortgage monitor report from Lender Processing Services (LPS).

The percentage of borrowers who are 30 days or more past due on their mortgage loans but not in foreclosure rose to 6.7%. That's an increase of 10% from the previous month and is at the highest level since February.

Some of this increase is seasonal, according to LPS, though the seasonal increase is usually not this large. Last June, the default rate rose by 3.4%.

The foreclosure inventory rate, meanwhile, continues to decline as banks process fewer foreclosures and opt for short sales and loan modifications instead. Foreclosures declined 4% in June from the previous month and are down 30% year-over-year.

In total, there are about 4.8 million U.S. residential properties that are either 30 or more days delinquent or in foreclosure.

Default rates are still above normal, but they are at lower than they have been in four and a half years prior to February, a sign that the housing market is healing. Rising home prices have more recently reduced the rate of new problem loans, but banks are still dealing with defaults from loans originated during the housing boom.

Most banks, including JPMorgan Chase , Wells Fargo , Bank of America and Citigroup , saw strong improvements in credit quality during the second quarter.

For more on bank earnings, see Credit Improvements Still Boosting Bank Profits.

-- Written by Shanthi Bharatwaj in New York.

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