Mortgage delinquency, foreclosure rates improving
According to the Mortgage Bankers Association’s (MBA) National Delinquency Survey, the national mortgage delinquency rate fell in the fourth quarter of 2012 to 7.09 percent of all loans on one-to-four-unit residential properties, marking a decrease of 31 basis points from the previous quarter, and down 49 basis points from one year ago, representing the lowest level since 2008. The MBA notes that delinquency rates traditionally increase between the third and fourth quarters of the year.
The percentage of loans on which foreclosure actions were started during the fourth quarter was 0.70 percent, hitting the lowest level since the second quarter of 2007, down 20 basis points from last quarter and down 29 basis points from one year ago.
The percentage of loans in the foreclosure process at the end of the fourth quarter was 3.74 percent, the lowest level since the fourth quarter of 2008, down 33 basis points from the third quarter and 64 basis points lower than one year ago.
The serious delinquency rate, the percentage of loans 90 days or more past due or in the process of foreclosure, was 6.78 percent, a decrease of 25 basis points from last quarter, and a decrease of 95 basis points from the fourth quarter of 2011.
The combined percentage of loans at least one payment past due or in foreclosure was 11.25 percent on a non-seasonally adjusted basis, a 46 basis point decrease from last quarter and a 128 basis points decrease from the same quarter one year ago.
Seeing improvement in mortgage performance
“We are seeing large improvements in mortgage performance nationally and in almost every state. The 30 day delinquency rate decreased 21 basis points to its lowest level since mid-2007. With fewer new delinquencies, the foreclosure start rate and foreclosure inventory rates continue to fall and are at their lowest levels since 2007 and 2008 respectively,” said Jay Brinkmann, MBA’s Chief Economist and Senior Vice President of Research.
Brinkmann added, “The foreclosure starts rate decreased by the largest amount ever in the MBA survey and now stands at half of its peak in 2009. Similarly, the 33 basis point drop in the foreclosure inventory rate is also the largest in the history of the survey. One cautionary note is that the 90+ delinquency rate increased by 8 basis points, reversing a fairly steady pattern of decline and the largest increase in this rate in three years. While we normally see an increase in this rate in individual states when they change their foreclosure laws, 38 states had increases in the percentage of loans three payments or more past due, indicating that we could see a modest increase in foreclosure starts in subsequent quarters.”
The MBA points to judicial foreclosure systems as the primary factor impacting the number of loans in the foreclosure process, as delinquent loans improved across the nation, but actually remains troubled in judicial states, with the average rate hitting 6.2 in judicial states, triple the average rate of 2.1 percent for non-judicial states. “In those cases,” Brinkmann said, “the ultimate reduction in the number of loans in foreclosure will have less to do with the recovery of the economy and the housing market than with the return to reasonable foreclosure timelines.
Many wonder how Superstorm Sandy has changed the face of delinquency and foreclosure rates, which the MBA notes is a “more modest” impact than what was seen after Hurricane Katrina. “New York, New Jersey and Connecticut saw increases in total past due rates,” Brinkmann noted, “while most other states in the nation saw a drop overall. While forbearance is in place for many of the borrowers affected by the storm, we ask servicers to report these loans as delinquent if the payment was not made based on the original terms of the mortgage regardless of the forbearance plans in place. We expect to see improvements in these states as we move into 2013.”