According to the Mortgage Bankers Association, the delinquency rate for mortgage loans on one-to-four family residential properties was 6.8% on a not seasonally adjusted basis in the second quarter of 2013, up slightly (0.06 percentage point) from its level in the first quarter, but 0.6 percentage points lower than its level in the second quarter of 2012.

The technical increase in the delinquency rate over the quarter reflected a 29 basis point decline in the share of mortgages 90 or more days past due that was more than offset by a 35 basis point increase in both the proportion of mortgages that were 30-59 days past due, +30 basis points, and 60-89 days past due, +5 basis points.  One percentage point equals 100 basis points.

Meanwhile, the share of mortgages that were seriously delinquent, mortgages that are 90 or more days overdue plus properties in foreclosure, fell by 51 basis points to 5.9% in the second quarter as the 29 basis point drop in the share of mortgages that were 90 or more days past due was joined by a 22 basis point fall in the share of properties in foreclosure. Since the second quarter of 2012, the share of homes in serious delinquency has fallen by 143 basis points.

Despite the recent uptick, the share of mortgages 30-59 days past due is not a strong indicator of serious delinquency. Chart 1 decomposes the share of delinquent mortgages according to their time past due and includes the share of properties going into foreclosure. According to this chart, only a portion of mortgages 30-59 days past due become seriously delinquent. Between the 1980 and 2006, the share of mortgages 30-59 days past due averaged 3.2% while the share of mortgages 60-89 days past due and 90 or more days past due both averaged 0.8% and the share of mortgages in foreclosure averaged 1.0%. A foreclosure rate that is greater than the share of mortgages 60-89 days past due and 90 or more days past due reflects the build-up of properties in this stage due to the length of the foreclosure process. The majority of the mortgages that become 30-59 days past due either remain in this stage of delinquency or cure.

In contrast, the share of mortgages 60-89 days past due closely tracks the percentage of mortgages 90 or more days past due and the proportion of mortgages in foreclosure. The similarity in rates over time suggests that that mortgages 60-89 days past due are more likely to become seriously delinquent. As a result, the share of mortgages that are 60-89 days past due is a good indicator of whether a property will become seriously delinquent. Despite the slight quarter-over-quarter rise in the percent of mortgages 60-89 days past due, Chart 1 shows that this measure is trending down, indicating that serious delinquencies should continue to fall.

Tags: economics, home building, housing, residential mortgages, single-family housing