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Residential Department: DataDecoded: April 2014

 

DataDecoded

Foreclosure and delinquency rates broadly improve

The delinquency rate for mortgage loans on one-to-four-unit residential properties decreased to a seasonally adjusted rate of 6.39 percent of all loans outstanding at the end of this past fourth quarter, the lowest level since first-quarter 2008. The delinquency rate decreased two basis points from the previous quarter and 70 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 this past fourth quarter was 2.86 percent, down 22 basis points from third-quarter ’13 and 88 basis points lower year over year. This was the lowest foreclosure-inventory rate seen since 2008. Percentage of Loans in Foreclosure, Source: MBA

The nonseasonally adjusted percentage of loans on which foreclosure actions were started during this past fourth quarter decreased to 0.54 percent from 0.61 percent, a decline of 7 basis points, and the lowest level since 2006. The serious-delinquency rate — the percentage of loans that are 90 days or more past due or in the process of foreclosure — was 5.41 percent, a decrease of 24 basis points from this past third quarter and a decrease of 137 basis points from fourth-quarter ’12.

We continue to see substantial improvement in both delinquency and foreclosure rates, with most measures now back to pre-crisis levels. The delinquency rate, at 6.39 percent, is more than 3 percentage points lower than its peak of more than 10 percent in 2010 and is edging closer to the historical average of around 5 percent. The percentage of loans in foreclosure has fallen for the seventh consecutive quarter, decreasing to 2.86 percent, the lowest level in six years. The percentage of new foreclosures started, at 0.54 percent, is the lowest in eight years and is back within its typical historical range. 

There was broad improvement in foreclosure rates this past fourth quarter, with 49 states and the District of Columbia recording a decrease. Florida still leads the nation in the percentage of loans in foreclosure, but that percentage has fallen to 8.56 percent from a peak of 14.5 percent. New Jersey and New York had the next two highest rates but both states did see a drop from the previous quarter. States with judicial foreclosure systems still account for most of the loans in foreclosure.

Of the 17 states that had a higher foreclosure-inventory rate than the national average, 15 were judicial states. Although the percentage of loans in foreclosure dropped in both judicial and nonjudicial states, the average rate for judicial states was 4.92 percent compared to the average rate of 1.52 percent for nonjudicial states. That being said, for judicial states this was still a significant improvement from the rate of 6.88 percent recorded in 2012.

In terms of new foreclosures started, about one-fifth of all states saw an increase, but as we have pointed out previously, quarterly movements in this measure have often been the result of changing state laws and the timing associated with these changes and implementation. This has usually resulted in quarterly swings in the foreclosure start rate, sometimes with an offsetting change in the 90-day-or-more delinquency category, as the foreclosure process is started and stopped.

The total past-due rate for Federal Housing Administration (FHA) loans increased this past fourth quarter by 41 basis points, but is still down 70 points year over year. The increase for the quarter was driven by a 37-basis-point increase in loans that were one payment past due. The foreclosure measures for FHA loans declined both over the quarter and over the year.

Loan cohorts from 2009 and earlier continue to make up more than 90 percent of seriously delinquent loans. Loans originated in 2007 and earlier accounted for 75 percent of seriously delinquent loans, while loans originated in 2008 and 2009 accounted for another 16 percent. This is important to note because current home prices, while still rising, are about 9 percent below the peak in 2007. Therefore, borrowers with loans originated in 2007 will be more vulnerable to traditional delinquency- and foreclosure-trigger events such as a divorce, job loss, health issue or death in the household.

MBA has been collecting metro-area data for more than a year now, and these are showing improvements similar to the national numbers. Among the 25 largest metropolitan areas, the Baltimore-Towson metro area had the highest 90-day-or-more delinquency rate at 3.87 percent, but that rate was an improvement from 4.91 percent in fourth-quarter ’12. The Minneapolis-St. Paul metro had the lowest such rate at 1.43 percent. With respect to the proportion of loans in foreclosure, Miami had the highest rate at 10.34 percent, but it also had the largest year-over-year decrease in its foreclosure rate. The two metro areas out of the top 25 that showed a year-over-year increase in loans in foreclosure were Nassau-Suffolk, N.Y., and Edison-New Brunswick, N.J.

To subscribe to MBA’s National Delinquency Survey, contact MBAResearch@mortgagebankers.org



 

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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