The delinquency rate for mortgage loans on one- to four-unit residential properties decreased to a seasonally adjusted rate of 6.41 percent of all loans outstanding at the end of the third quarter of 2013, the lowest level since the second quarter of 2008. The delinquency rate dropped 55 basis points from the previous quarter, and 99 basis points from one year ago, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey.
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 third quarter was 3.08 percent down 25 basis points from the second quarter and 99 basis points lower than one year ago. This was the lowest foreclosure inventory rate seen since 2008.
The percentage of loans on which foreclosure actions were started during the third quarter decreased to 0.61 percent from 0.64 percent, a decrease of three basis points, and the lowest level since early 2007.
The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 5.65 percent, a decrease of 23 basis points from last quarter, and a decrease of 138 basis points from the third quarter of last year. However, as with past quarters’ results, the reported improvement in the seriously delinquent percentages may be slightly less than stated because one large specialty servicer that has received a number of loan transfers does not participate in the MBA survey.
The combined percentage of loans at least one payment past due or in foreclosure was the lowest in five years, decreasing to 9.75 percent on a non-seasonally adjusted basis, 38 basis points lower than last quarter and 196 basis points lower than the same quarter one year ago.
VA loans had their lowest delinquency rate since 1980, in part because about 40 percent of the VA portfolio has been originated since the end of 2007 and the home price crash.
“The degree to which the mortgage delinquency and foreclosure problem has changed over the last five years is perhaps best illustrated by the fact that last quarter New Jersey led the nation in the increase in the percentage of foreclosure actions filed, followed by Delaware, Maryland and Indiana. While Florida still leads the nation in the percentage of loans in foreclosure, that percentage is falling. In contrast, New York and New Jersey were the only two states that saw an increase in the percentages of loans in foreclosure,” said Jay Brinkmann, MBA’s Chief Economist and SVP of Research and Education.
“States with judicial foreclosure systems still account for most of the loans in foreclosure. While the percentages of loans in foreclosure dropped in both judicial and nonjudicial states, the average rate for judicial states was 5.28 percent, more than triple the average rate of 1.66 percent for nonjudicial states.
“A few major points need to be highlighted. To begin, many mortgage servicers are already reducing their staffs that handled delinquent loans and foreclosures and we expect that trend to continue as the numbers continue to fall.
“Also, while home prices have shown some considerable improvement, in only a small number of states are they back above their pre-2007 levels. This is noteworthy because roughly three-quarters of all seriously delinquent loans were originated in 2007 or earlier. So even if the economy continues to improve, those loans are more likely to proceed to foreclosure in the event of a divorce, illness or loss of a job because of lack of borrower equity. This will keep the foreclosure rates above historical norms for a few more years despite the strong credit standards of recent vintages.
“Finally, mortgage delinquencies are the result of local economic conditions, not the cause of them. Clearly local home price bubbles and the temporary injections from cash out refinancing and speculation temporarily boosted some areas and made the subsequent economic crash even worse, but we are now at a point where local economic growth and population movements will determine housing demand and mortgage performance. Those areas with the weaker climates for economic growth will see home value and delinquency problems that are beyond the abilities of the mortgage industry and housing regulators to impact in a meaningful way,” Brinkmann said.
Change from last quarter (second quarter of 2013)
On a seasonally adjusted basis, the overall delinquency rate decreased for all loan types. The seasonally adjusted delinquency rate decreased 46 basis points to 3.35 percent for prime fixed loans and decreased 80 basis points to 5.97 percent for prime ARM loans. For subprime loans, the delinquency rate decreased 179 basis points to 19.20 percent for subprime fixed loans and 153 basis points to 21.46 percent for subprime ARM loans. The delinquency rates for VA loans fell by 73 basis points to 5.41 percent and the FHA delinquency rate declined by 97 basis points to 10.06 percent.
The non-seasonally adjusted percent of loans in foreclosure, also known as the foreclosure inventory rate, decreased from last quarter to 3.08 percent. The foreclosure inventory rate for prime fixed loans decreased 15 basis points to 1.72 percent and the rate for prime ARM loans decreased 91 basis points from last quarter to 4.54 percent. For subprime loans, the rate for subprime fixed loans decreased 90 basis points to 8.99 percent and the rate for subprime ARM loans decreased 115 basis points to 16.45 percent. The foreclosure inventory rate for FHA loans decreased 32 basis points to 3.36 while the rate for VA loans decreased seven basis points to 1.81 percent.
The non-seasonally adjusted foreclosure starts rate decreased 21 basis points for prime ARM loans to 0.60 percent, 12 basis points for subprime fixed to 1.86 percent, 34 basis points for subprime ARM loans to 2.91 percent, four basis points for FHA loans to 0.77 percent and three basis points for VA loans to 0.44 percent. The foreclosure start rate remained unchanged from last quarter for prime fixed loans at 0.33 percent.
Change from last year (third quarter of 2012)
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.
Compared with the third quarter of 2012, the foreclosure inventory rate decreased 62 basis points for prime fixed loans, 328 basis points for prime ARM loans, 37 basis points for subprime fixed, 285 basis points for subprime ARM loans, 72 basis points for FHA loans and 40 basis points for VA loans.
Over the past year, the non-seasonally adjusted foreclosure starts rate decreased 21 basis points for prime fixed loans, 87 basis points for prime ARM loans, five basis points for subprime fixed, 49 basis points for subprime ARM loans, 35 basis points for FHA loans and 13 basis points for VA loans.