The delinquency rate for mortgage loans on one-to-four unit residential properties rose to a seasonally adjusted rate of 9.64% of all loans outstanding as of the end of the third quarter – up 40 basis points (bps) from the second quarter and up 265 bps from one year ago, according to the Mortgage Bankers Association's (MBA) National Delinquency Survey.
The non-seasonally adjusted delinquency rate increased 108 bps from 8.86% in the second quarter to 9.94% this quarter.
The delinquency rate breaks the record set last quarter. The records are based on MBA data dating back to 1972. The delinquency rate includes loans that are at least one payment past due but does not include loans somewhere in the process of foreclosure.
The percentage of loans in the foreclosure process at the end of the third quarter was 4.47% – an increase of 17 bps from the second quarter and 150 bps from one year ago. The combined percentage of loans in foreclosure or at least one payment past due was 14.41% on a non-seasonally adjusted basis – the highest ever recorded in the MBA delinquency survey.
The percentage of loans on which foreclosure actions were started during the third quarter was 1.42% – up 6 bps from last quarter and up 35 bps from one year ago.
The percentages of loans 90 days or more past due, loans in foreclosure and foreclosures started all set new record highs. The percentage of loans 30 days past due is still below the record set in the second quarter of 1985.
"Despite the recession ending in mid-summer, the decline in mortgage performance continues," says Jay Brinkmann, MBA's chief economist. "Job losses continue to increase and drive up delinquencies and foreclosures, because mortgages are paid with paychecks, not percentage-point increases in GDP."
Unemployment numbers have grown by about 5.5 million in the past year, whereas the number of serious delinquencies has increased by about 2 million.
Prime fixed-rate loans held the largest share of foreclosure starts and were the biggest driver of the foreclosure increase, Brinkmann adds.
"Thirty-three percent of foreclosures started in the third quarter were on prime fixed-rate loans, and those loans were 44 percent of the quarterly increase in foreclosures," Brinkmann says. "The foreclosure numbers for prime fixed-rate loans will get worse, because those loans represented 54 percent of the quarterly increase in loans 90 days or more past due but not yet in foreclosure."
Prime adjustable-rate mortgages (ARMs), including pay-option ARMs, continue to perform at deteriorating levels.
"The foreclosure rate on [Federal Housing Administration (FHA)] loans also increased, despite having a large increase in the number of FHA-insured loans outstanding," Brinkmann says.
The number of FHA loans outstanding has increased by about 1.1 million over the last year.
Florida, California, Arizona and Nevada were home to 43% of all foreclosures started in the third quarter, representing a slight decrease from the second quarter's 44%. At the end of September, 25% of mortgages in Florida were at least one payment past due or in foreclosure.
Delinquency and foreclosure rates will get worse before they get better, Brinkmann says, as the unemployment rate is unlikely to improve until sometime next year. Even then, he says, job growth will be slow.
SOURCE: Mortgage Bankers Association