Mortgage Bankers: Loan Delinquencies Continue to Fall

The Mortgage Bankers Association’s National Delinquency Survey showed the (seasonally adjusted) overall delinquency rate on first-lien residential mortgages fell to 7.4% during the first quarter of 2012. According to the release, the 30-days late delinquency bucket saw its delinquency rate decline to its lowest reading in 5 years and is now on par with normal levels. The 60-day delinquency bucket saw a similarly large decline during the first quarter, while loans more than 90 days overdue (3.05%) dropped to late-2008 levels. Seriously delinquent loans, i.e. those 90+ days overdue or in the foreclosure process, as a share of all mortgages declined 29 basis points to 7.44%. Foreclosure inventories nationwide ticked slightly higher last month due to rising foreclosures among prime and FHA loans. By contrast, subprime loans are accounting for a smaller share of mortgage foreclosures as the non-performing loans have generally been resolved through the foreclosure or loan modification process already.

Geographically, the improvement in loan performance during the first quarter was fairly widespread. The foreclosure start rate declined in 41 states and only 7 (Washington, Oregon, New York, New Jersey, New Mexico, Maryland and Arkansas) saw their share of seriously delinquent loans increase versus the fourth quarter of 2011. Florida remained the epicenter of the nation’s foreclosure inventory, accounting for nearly a quarter of the national total, and also possessed the highest foreclosure start rate during the first three months of 2012 (1.73%). Overall, five states—Florida, California, Illinois, New York and New Jersey—account for 52% of the national foreclosure inventory, but represent less than 32% of all serviced loans in the U.S..

Michael Fratantoni, MBA’s Vice President of Research and Economics, discussed some of the causes for geographic disparity in foreclosure rates:

“The problem continues to be the slow-moving judicial foreclosure systems in some of the largest states.  While the rate of foreclosure starts is essentially the same in judicial and non-judicial foreclosure states, the percent of loans in the foreclosure process has reached another all-time high in the judicial states, 6.9 percent.  In contrast, that rate has fallen to 2.8 percent in non-judicial states, the lowest since early 2009. As the foreclosure starts rate is essentially the same in both groups of states, that difference is due entirely to the systems some states have in place that effectively block timely resolution of non-performing loans and is not an indicator of the fundamental health of the housing market or the economy.  In fact, hard-hit markets like Arizona that have moved through their foreclosure backlog quickly are seeing home price gains this spring.”



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