The delinquency rate for mortgage loans on one- to-four-unit residential properties increased to a seasonally adjusted rate of 8.32 percent of all loans outstanding as of the end of the first quarter of 2011, an increase of seven basis points from the fourth quarter of 2010, and a decrease of 174 basis points from one year ago, according to the Mortgage Bankers Association's (MBA) National Delinquency Survey. The non-seasonally adjusted delinquency rate decreased 117 basis points to 7.79 percent this quarter from 8.96 percent last quarter.
The MBA's National Delinquency Survey found that the percentage of loans on which foreclosure actions were started during the first quarter was 1.08 percent, down 19 basis points from last quarter and down 15 basis points from one year ago. The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure. The percentage of loans in the foreclosure process at the end of the first quarter was 4.52 percent, down 12 basis points from the fourth quarter of 2010 and 11 basis points lower than one year ago. The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 8.10 percent, a decrease of 50 basis points from last quarter, and a decrease of 144 basis points from the first quarter of last year.
The combined percentage of loans in foreclosure or at least one payment past due was 12.31 percent on a non-seasonally adjusted basis, a 129 basis point decline from 13.60 percent last quarter.
"Most of these numbers continue to point to a mortgage market on the mend. Short-term delinquencies remain at pre-recession levels," said Jay Brinkmann, chief economist of the Mortgage Bankers Association (MBA). "Loans 90 days or more delinquent have now dropped for five straight quarters and are at their lowest level since the beginning of 2009. Foreclosure starts are at the lowest level since the end of 2008 and had the second largest drop ever. The percentage of loans somewhere in foreclosure is down from last quarter's record high and also had one of the largest drops we have ever seen, although the reasons for the drop will differ from market to market."
On a seasonally adjusted basis, the overall delinquency rate increased for all but Federal Housing Administration (FHA) loans, with the biggest increases coming in the sub-prime categories. The seasonally adjusted delinquency rate stood at 4.59 percent for prime fixed loans, 11.25 percent for prime adjustable-rate mortgages (ARMs), 22.04 percent for sub-prime fixed loans, 26.31 percent for sub-prime ARM loans, 12.03 percent for FHA loans, and 6.93 percent for VA loans.
The percentage of loans in foreclosure, also known as the foreclosure inventory rate, decreased 12 basis points overall to 4.52. The foreclosure inventory rate for prime fixed loans, which make up the largest portion of the survey (accounting for 63 percent of all loans outstanding), decreased eight basis points to 2.59 percent. The rate for prime ARM loans decreased 69 basis points from last quarter to 9.53 percent. Sub-prime fixed loans saw an increase of 67 basis points to 10.53 percent, which is a new record high in the survey. The rate for subprime ARM loans increased 26 basis points to 22.26 percent, while the rate for FHA loans increased five basis points to 3.35 percent and the rate for VA loans increased four basis points to 2.39 percent.
"National statistics, however, are somewhat meaningless in real estate because local market conditions determine values and peoples' perception of values of conditions," said Brinkmann. "Florida remains a problem. Twenty-four percent of all mortgages in the country that are in foreclosure are in Florida and 23 percent of the loans in Florida are anywhere from one payment past due to in foreclosure. In Nevada, foreclosure actions are still being initiated at an annualized rate of over nine percent. In Arizona the annualized rate of foreclosures started is over seven percent and more than half of all of the loans in foreclosure in this country are in just five states. Yet 38 states have foreclosure rates that are below the national average. We have areas of recovery but those numbers are often overwhelmed by the bad numbers still coming out of a few large states."
The foreclosure starts rate decreased 16 basis points for prime fixed loans to 0.68 percent, 42 basis points for prime ARM loans to 2.38 percent, 19 basis points for subprime fixed to 2.56 percent and 57 basis points for subprime ARMs to 3.67 percent. The foreclosure starts rate also decreased nine basis points for FHA loans to 0.93 percent and 15 basis points for VA loans to 1.02 percent.
Given the challenges in interpreting the true seasonal effects in these data when comparing quarter to quarter changes, it is important to highlight the year-over-year changes of the non-seasonally adjusted results. The non-seasonally adjusted delinquency rate decreased for all loan types since the first quarter of 2010. The delinquency rate decreased 146 basis points for prime fixed loans, 205 basis points for prime ARM loans, 330 basis points for sub-prime fixed loans, 245 basis points for sub-prime ARM loans, 103 basis points for FHA loans, and 88 basis points for VA loans.
The non-seasonally adjusted foreclosure starts rate decreased one basis point for prime fixed loans, 33 basis points for prime ARM loans, eight basis points for sub-prime fixed loans, 65 basis points for subprime ARM loans, 53 basis points for FHA loans, and 16 basis points for VA loans.
"Finally, we need to recognize the increasing divergence in market recovery attributed to differences in states' laws," said Brinkmann. "The states with the biggest increases in the number of loans in foreclosure are Florida, New Jersey and Illinois. The states with the largest decreases in loans in foreclosure were California, Arizona and Michigan. Each of these six states had declines in loans 90 days or more past due and in the rate of new foreclosures started. What differentiated those with increases in the percentage of loans in foreclosure? Florida, New Jersey and Illinois have judicial foreclosure processes that lengthen the foreclosure timeline and increase the number of loans that sit in foreclosure, all other things being equal."