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Residential Department: DataDecoded: October 2013



Foreclosure starts drop to lowest level in six years

Overall mortgage delinquency rates and foreclosure rates decreased this past second quarter, according to the second-quarter National Delinquency Survey released by the Mortgage Bankers Association (MBA). In addition, the number of homes on which foreclosure actions were started dropped to the lowest level in more than six years.

The delinquency rate for mortgage loans on one-to-four-unit residential properties decreased to a seasonally adjusted rate of 6.96 percent of all loans outstanding as of the end of the second quarter, a decrease of 29 basis points from the previous quarter, and down 62 basis points from one year ago. In MBA’s survey, the delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure.

"For most of the country, delinquencies and foreclosures have returned to more normal historical levels."

The percentage of loans on which foreclosure actions were started this past second quarter decreased to 0.64 percent from 0.7 percent, a decrease of six basis points. This is the lowest level seen since first-quarter 2007 and is less than half of the all-time high of 1.42 percent reached in September 2009. The percentage of loans in the foreclosure process at the end of the second quarter was 3.33 percent — down 22 basis points from this past first quarter and 94 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 5.88 percent, a decrease of 51 basis points from this past first quarter, and a decrease of 143 basis points from second-quarter 2012.datadecoded_10-13

For most of the country, delinquencies and foreclosures have returned to more normal historical levels. Most states are at or only slightly above longer-term averages, and some of the worst-hit states are showing improvement. A prime example of this is Florida. Although 10 percent of all mortgages in Florida are in the foreclosure process, this is down considerably from the high of 14.5 percent two years ago. And although Florida leads the country in the rate of foreclosures started at 1.1 percent, that rate is the lowest since mid-2007 and half of what it was three years ago.

New York, New Jersey and Connecticut posted some of the highest numbers in terms of the percentage of loans in foreclosure. States like California, Nevada and Arizona, which have been the poster children for hard-hit states over the past few years, have been replaced by these states in the Northeast. Foreclosure starts in New York hit an all-time high at 1.07 percent this past second quarter and is now essentially equal to Florida. The percentage of loans in foreclosure in New Jersey — 8.01 percent — remains about the same as the rates in California, Arizona and Nevada combined. The foreclosure percentages in Connecticut are back to near all-time highs for that state, with foreclosure inventory at 5 percent and foreclosure starts at 0.86 percent this past second quarter.

As has been a persistent problem throughout the housing recovery, states with judicial foreclosure systems continue to hold a disproportionate share of the foreclosure backlog. Although the percentage of loans in foreclosure dropped in the states with judicial systems and also in the states with nonjudicial systems, the average rate for judicial states was 5.59 percent, triple the average rate of 1.86 percent for nonjudicial states. Both declined to recent lows, with judicial states seeing the lowest foreclosure inventory since 2009 and nonjudicial states seeing the lowest foreclosure inventory since 2007.

Overall, this report is good news for the housing market. Most measures are at or near long-run averages. With market fundamentals improving, we expect to see similar reports in the coming quarters. The primary barrier to further relief remains the number of homes in the foreclosure process. As those continue to get worked through, we will see even more improvement. 

To subscribe to MBA’s National Delinquency Survey, contact


David H. Stevens is president and CEO of the Mortgage Bankers Association. Previously, Stevens served as assistant secretary for housing at the U.S. Department of Housing and Urban Development and was appointed commissioner of the Federal Housing Administration by President Obama. Stevens was also president and chief operating officer of Long and Foster Companies, senior vice president at Freddie Mac, and executive vice president at Wells Fargo. Reach the MBA at (202) 577-2700.

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