The end of 2013 showed broad improvements in delinquency and foreclosure rates, dropping to their lowest levels in six years, reports the Mortgage Bankers Association (MBA) in its Q4 2013 National Delinquency Survey.
The delinquency rate for mortgage loans on one-to-four-unit residential properties decreased to a seasonally adjusted rate of 6.39% of all loans outstanding at the end of the fourth quarter of 2013 – the lowest level since the first quarter of 2008.
The delinquency rate decreased two basis points from the previous quarter and 70 basis points from one year before. (The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure.)
The percentage of loans in the foreclosure process at the end of the fourth quarter was 2.86%, down 22 basis points from the third quarter and 88 basis points lower than one year before. This was the lowest foreclosure inventory rate seen since 2008, the MBA notes.
The non-seasonally adjusted percentage of loans on which foreclosure actions were started during the fourth quarter decreased to 0.54% from 0.61% – a decrease of seven basis points and the lowest level since 2006.
The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 5.41% – a decrease of 24 basis points from last quarter, and a decrease of 137 basis points from the fourth quarter of the year prior.
Michael Fratantoni, MBA's chief economist and senior vice president of research and industry technology, notes that most measures are "now back to pre-crisis levels," the delinquency rate is "edging closer to the historical average" of about 5% and the percentage of new foreclosures started is "back within its typical historical range."
Fratantoni says that 49 states and the District of Columbia recorded a decrease in foreclosure rates and that while Florida still has the highest percentage of loans that are in floreclosure, the state's rate fell to 8.56% from its peak of 14.5%. He adds that New Jersey and New York had the highest rates after Florida but both states also recorded a drop.
He reports that the average percentage of loans in foreclosure was 4.92% in judicial states but 1.52% in non-judicial states – a "significant improvement," however, for the judicial states, which recorded a 6.88% rate in 2012.
"Loan cohorts from 2009 and earlier continue to make up more than 90 percent of seriously delinquent loans," he reports. "Loans originated in 2007 and earlier accounted for 75 percent of the seriously delinquent loans, while loans originated in 2008 and 2009 accounted for another 16 percent.
"This is important to note because current home prices, while still rising, are about 9 percent below the peak in 2007. Therefore, borrowers with loans originated in 2007 will be more vulnerable to traditional delinquency and foreclosure trigger events such as a divorce, job loss, health issue or death in the household," Fratantoni explains.
He notes that among the 25 largest metropolitan areas, the Baltimore-Towson metro area had the highest 90-plus day delinquency rate (3.87%), which, however, was down from 4.91% from the year before.
Comparatively, Fratantoni says the Minneapolis-St. Paul metro area recorded the lowest rate, at 1.43%, and also recorded the biggest decrease in foreclosure over the year.