Mortgage Bankers Association

MBA: Delinquency, Foreclosure Rates Reach 6-Year Lows

Sorohan, Mike--Aug. 8, 2014 Mortgage delinquencies fell for the fifth consecutive quarter, reaching seven-year lows, the Mortgage Bankers Association reported. The mortgage foreclosure rate fell to a six-year low. The MBA 2nd Quarter National Delinquency Survey said the delinquency rate for mortgage loans on one-to-four-unit residential properties decreased to a seasonally adjusted rate of 6.04 percent of all loans outstanding at the end of the second quarter. The delinquency rate decreased for the fifth consecutive quarter and reached the lowest level since fourth quarter 2007. The delinquency rate decreased by seven basis points from the previous quarter and by 92 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 survey said the percentage of loans in the foreclosure process at the end of the second quarter fell to 2.49 percent, down by 16 basis points from the first quarter and 84 basis points lower than one year ago. This was the lowest foreclosure inventory rate seen since first quarter 2008. The percentage of loans on which foreclosure actions started during the second quarter fell to 0.40 percent from 0.45 percent, a decrease of five basis points and the lowest level since second quarter 2005. The serious delinquency rate--the percentage of loans that are 90 days or more past due or in the process of foreclosure--fell to 4.80 percent, a decrease of 24 basis points from the first quarter and 108 basis points from a year ago. Similar to the previous quarter, 75 percent of seriously delinquent loans originated in 2007 and earlier. Loans with vintages started in 2011 and later only accounted for 6 percent of all seriously delinquent loans. “Strong job growth and continued increases in home prices in most markets have been the main contributors to these steady improvements in mortgage performance,” said MBA Chief Economist Mike Fratantoni. “We have returned to more typical seasonal patterns with respect to mortgage delinquency, with 30-day and 60-day delinquency rates increasing from the first to the second quarter on an unadjusted basis. Adjusting for the seasonal pattern, we estimate that delinquencies were down for the quarter, and are down almost a full percentage point from last year.” Fratantoni said loans made in recent years continue to perform extremely well due to the improving market and tight credit conditions, but noted a new trend emerging in growth in the number of prime adjustable-rate mortgage loans serviced. “Many of these are recently originated jumbo loans that are kept on banks’ balance sheets,” Fratantoni said. “However a majority of outstanding prime ARM loans were originated in 2007 and earlier and these loan vintages accounted for over 90 percent of seriously delinquent prime ARM loans. These older cohorts are keeping the seriously delinquent numbers elevated despite the inflow of newer loans with stronger credit quality.” MBA Director of Economic Forecasting Joel Kan said the declining trend in later stage delinquencies and foreclosure measures is clearly continuing at the national level, noting some states hardest hit by the crisis such as California and Arizona now have foreclosure inventory rates that are both back to pre-crisis levels and less than half the current national rate. On the other hand, despite declines last quarter, states with slower-moving judicial foreclosure regimes, such as New Jersey, Florida and New York, have foreclosure inventory rates two to three times the national average. The report noted 18 states with a higher foreclosure inventory rate than the national average, of which 15 were judicial states.