Since the upswing in 2008, the share of U.S. Mortgage loans both in the foreclosure process and in delinquency has hit their lowest levels. This is according to Mortgage Bankers Association’s latest national survey. One to four unit residential properties’ share of loans for those that had missed a mortgage payment in the fourth-quarter fell to a seasonally adjusted 7.09%. This was down from 7.58% in the fourth-quarter and 7.4% in the third-quarter 2011. MBA said that it was the lowest delinquency rate since 2008. The non-seasonally adjusted rate fell to 7.51% though delinquency rates normally rise between the 3rd and 4th quarter.
Loans In The Foreclosure Process
Loans in the foreclosure process are not included in the delinquency rate. For the first time last quarter, the percentage of loan that went into foreclosure was 0.7%. This was down from 0.99% in the fourth-quarter and 0.9% in the third-quarter of 2011. MBA said that since the second quarter of 2007 this was the lowest rate of foreclosure. At the end of last quarter, mortgage loans that were in the foreclosure process had an overall rate of 3.74%. It is the lowest level since the last quarter of 2008 and it is also down from 4.34% a year ago.
MBA’s senior vice president of research and chief economist, Jay Brinkmann, said in a statement that in almost every state and nationally, there were large improvements in mortgage performance. He added that there was a 21 basis point decease in 30 day delinquency rate to its lowest level since the middle of 2007. A basis point is equivalent to 0.01% or one-hundredth of a percentage point. Brinkmann said in the MBA survey that the foreclosure start rate stands at half of its peak in 2009, a decrease by the largest amount ever. In the history of the survey, the 33 basis point drop in the foreclosure inventory rate is the largest.
Jay Brinkmann cautioned that there was a rise of 0.08% in the delinquency rate for loans that were 90 days or more past due. It is the largest increase in three years and has reversed a fairly steady decline pattern. In future quarters, a moderate increase could be seen by foreclosure starts which are indicated by the rise. Brinkmann noted that judicial states had an average rate of 6.2% (three times of non-judicial states which had an average rate of 2.1%) despite the percentages of loans in foreclosure having dropped in the majority of states. 12% of mortgages in Florida are in some foreclosure process stage. Though it is down from the previous year’s peak of 14.5%, it is still a very high rate that impacts the national rate.
Reducing the number of foreclosure loans in judicial foreclosure states will have more to do with the return to reasonable foreclosure time lines than the housing market and the recovery of the economy. Except for loans that were insured by FHA (Federal Housing Administration), seasonally adjusted delinquency rates for all loan types fell from the third quarter.
In the fourth quarter, the FHA delinquency rate was at 11.17 after rising by 3 basis points. Brinkmann said that the FHA loans performance is mixed. While the percentages for both foreclosure inventory and foreclosure starts fell, the delinquency percentages generally increased slightly or remained flat. This was particularly true in the case of loans that were 90 days or more past due. He added that 2008 and 2009 were the years that 44% of FHA loans which are seriously delinquent were made. The loans made during these two years represent a small share of FHA’s book of business.
For prime fixed loans, the loans guaranteed by DVA (Department of Veterans Affairs) stood at 5.79%, subprime ARM loans at 22.34%, subprime fixed loans at 19.15%, prime adjustable-rate mortgage loans at 8.02% and seasonally delinquency rate at 3.79%. In the fourth quarter, there was a quarter-to-quarter decrease in foreclosure inventory on all loan types. For prime fixed loans, the rate of foreclosure inventory stood at 2.1%, 2.08% for VA loans, 3.85% for FHA loans, 9.28% for subprime fixed loans, 18.24% for subprime ARM loans and 6.68% for prime ARM loans.