The U.S. mortgage delinquency rate (loans 30 days or more past due) decreased to a seasonally adjusted rate of 4.99% at the end of the third quarter – the lowest level since the first quarter of 2007, according to the Mortgage Bankers Association's (MBA) National Delinquency Survey.
The delinquency rate decreased 31 basis points compared with the second quarter and decreased 86 basis points compared with the third quarter of 2014, according to the report.
About 1.88% of all loans were in some stage of foreclosure at the end of the third quarter – down 21 basis points from the second quarter and down 51 basis points compared with one year earlier to reach the lowest rate since the third quarter of 2007.
Foreclosures were started on 0.38% of all loans at the end of the third quarter – a decrease of two basis points from the previous quarter and down six basis points from one year ago to reach the lowest level since the second quarter of 2005.Â
The serious delinquency rate – loans that are 90 days or more past due or in the process of foreclosure – was 3.57%, a decrease of 38 basis points compared with the second quarter and a decrease of 108 basis points compared with the third quarter of 2014. It was the lowest serious delinquency rate since the third quarter of 2007.
Marina Walsh, vice president of industry analysis for the MBA, cites ‘a nationwide housing market recovery, resolution of long-standing troubled loans that eventually proceeded through the foreclosure process and an improving employment outlook that provided distressed borrowers viable alternatives to foreclosure’ as factors that led to the major decline in delinquencies and foreclosures.
‘The overall delinquency rate for Federal Housing Administration (FHA) loans dropped to 8.91 percent in the third quarter from 9.01 percent in the second quarter, as the 90 day or more delinquent category declined by 20 basis points and more than offset an 11-basis-point increase in the 30 day delinquency rate,’ Walsh says in a statement. ‘In addition, the FHA foreclosure inventory rate dropped to 2.65 percent in the third quarter from 2.68 percent in the second quarter and 2.73 percent a year ago.
‘While only 40 percent of loans serviced are in judicial states, these states account for a majority of loans in foreclosure,’ Walsh says. ‘For states where the judicial process is more frequently used, 3.01 percent of loans serviced were in the foreclosure process compared to 1.06 percent in non-judicial states. States that utilize both judicial and non-judicial foreclosure processes had a foreclosure inventory rate closer that of the non-judicial states at 1.26 percent.’
As of the third quarter, New Jersey, New York and Florida had the highest percentage of loans in foreclosure in the nation. However, all three states saw dramatic decreases in their foreclosure inventory rates. New Jersey's foreclosure inventory rate was 6.47%; however, it saw a decrease of 84 basis points – the largest decrease among all of the states in the third quarter. New York's foreclosure inventory rate was 4.77%, down from 5.31% in the second quarter. Florida's foreclosure inventory rate was 3.46%, down from 4.24% in the second quarter.
‘Legacy loans continued to account for the majority of all troubled mortgages,’ Walsh says. ‘Across all loans, 80 percent of the loans that were seriously delinquent were originated before the year 2009, even as the overall rate of serious delinquencies for those cohorts decreased.’