Mortgage Bankers Association Report Offers Mixed News

The Mortgage Bankers Association released National Delinquency Survey statistics for the second quarter of 2010.  The delinquency rate – loans that are not in foreclosure with at least one payment late – fell from a seasonally-adjusted rate of 10.06% in the first quarter of 2010 to 9.85% in the second quarter. The 9.85% rate represents an increase of 61 basis points from a year ago.

The foreclosure rate remained approximately steady at a rate of 4.57%, which is still near record highs.  In contrast, for the 2nd quarter of 2006, the rate was 0.99%.

The good news in the report is that the rate of foreclosure starts continues to fall (to 1.11%) after having peaked in the third quarter of 2009 (1.42%).  The share of loans that are more than 90-days delinquent also declined somewhat (4.82%), having peaked in the first quarter of 2010 (5.02%).

However, the share of loans that are 30-days delinquent is increasing again.  The second quarter rate is 3.51%, after having fallen to 3.31% in the fourth quarter of 2009 and peaking at 3.77% in the first quarter of 2009.

MBA attributes the increase in short-term delinquencies to the sour job market.  Jay Brinkman, MBA’s Chief Economist, stated:

“Ultimately the housing story, whether it is delinquencies, homes sales or housing starts, is an employment story. Only when we see a consistent increase in employment will we see an increase in sales and starts, and a sustained improvement in the delinquency numbers. Until we see the increase in the number of households that comes with an increase in the number of paychecks, all measures of the health of the housing industry will continue to be weak.”

These numbers, and continuing economic challenges, suggest that the long-term delinquency numbers will rise in future MBA reports.  For example, recent data from the government Making Home Affordable Program (HAMP) indicate that of 1.3 million trial modifications initiated, more than 616,000 have been cancelled.  More than 3 million loans, for almost 1.5 million borrowers, are eligible for the HAMP program.

The foreclosure starts rate remains highest in the states of Nevada (2.93%), Florida (2.07%), and Arizona (2.02%).  The 90-day delinquency rates are highest for the states of Nevada (8.56%), California (6.5%), Arizona (6.17%), and Florida (6.09%).

Foreclosures and short-sales are key to understanding the supply challenge in the housing market.  The most recent Census estimates for July place the newly-constructed home inventory at only 210,000 homes, the lowest since 1968.  The National Association of Realtors estimates that for July the existing home inventory totaled 3.984 million.  In contrast, for 2007, the new home inventory average total was 496,000 and the existing home inventory average total was 3.974 million.



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