U.S. Mortgage Delinquency Rates On The Rise, Says New MBA Survey

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According to the Mortgage Bankers Association's (MBA) latest National Delinquency Survey, the delinquency rate for mortgage loans on one-to-four-unit residential properties increased to a seasonally adjusted rate of 7.58 percent of all loans outstanding as of the end of the second quarter of 2012, an increase of 18 basis points from the first quarter, but a decrease of 86 basis points from one year ago.

The non-seasonally adjusted delinquency rate increased 41 basis points to 7.35 percent this quarter from 6.94 percent last quarter. Delinquency rates typically increase between the first and second quarters of the year.

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 on which foreclosure actions were started during the second quarter was 0.96 percent, unchanged from last quarter and from one year ago. The percentage of loans in the foreclosure process at the end of the second quarter was 4.27 percent, down 12 basis points from the first quarter and 16 basis points lower than one year ago. The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 7.31 percent, a decrease of 13 basis points from last quarter and a decrease of 54 basis points from one year ago.

The combined percentage of loans in foreclosure or at least one payment past due was 11.62 percent on a non-seasonally adjusted basis, a 29 basis point increase from last quarter, but a 92 basis points decrease from the same quarter one year ago.

Jay Brinkmann, MBA's Chief Economist said, "Mortgage delinquencies were up only slightly over the last quarter. Perhaps more important than the small size of the increase, however, is the fact that it reversed the trend of fairly steady drops in delinquencies we have seen over the last year. This is consistent with the slowdown in the economy during the first half of the year and our stubbornly high unemployment rate. Whether this is just a temporary blip or a sign of a true change in direction for mortgage performance will fundamentally depend on the direction of employment over the remainder of the year."

Brinkmann continued, "While the rate of new foreclosure filings was unchanged, that rate would have fallen were it not for the considerable jump in foreclosure starts on FHA loans. This quarter's rate set an all-time record for FHA loans, but it was only slightly higher than the previous high set in 2010. The jump was due to one or more large servicers of FHA loans restarting foreclosure actions on delinquent FHA loans after the completion of the Department of Justice review and the mortgage servicing settlement. It does not, however, represent a significant decline in FHA performance. These loans had been considered seriously delinquent for some time and have now been moved from the 90-plus day delinquency bucket to the in foreclosure bucket, with little net change.

"Among the states, the rate of new foreclosure actions in Maryland was the highest in the nation during the second quarter, more than double the national average. The Maryland numbers, however, were largely driven by the resumption of foreclosures following the servicing settlement. While Maryland had the biggest increase in foreclosures, it also had the biggest drop in loans 90 days or more past due but not in foreclosure, an important step in working through the backlog of Maryland's problem loans.

"Washington had the second largest increase in foreclosures started, after the implementation of new filing requirements delayed new foreclosures for one quarter in that state. As we have seen over the years, new state requirements have the effect of causing large quarter-to-quarter swings in foreclosure starts but have little long-term effect.

"In terms of the percentage of loans in foreclosure, Florida continues to lead the nation at 13.7 percent, more than three times the national average, followed by New Jersey at 7.7 percent, Illinois at 7.1 percent and New York at 6.5 percent. In contrast, Arizona and California, two of the states hit hardest by the housing downturn, are at 3.2 percent and 3.1 percent respectively, both more than a full percentage point below the national average."

Change from last quarter (first quarter of 2012)

On a seasonally adjusted basis, the overall delinquency rate increased for all loan types except FHA loans. The seasonally adjusted delinquency rate increased 17 basis points to 4.24 percent for prime fixed loans and increased 14 basis points to 9.19 percent for prime ARM loans. For subprime loans, the delinquency rate increased 52 basis points to 19.85 percent for subprime fixed loans and increased 44 basis points to 22.60 percent for subprime ARM loans. While the delinquency rate for VA loans also increased eight basis points to 6.65 percent, FHA loans saw a decline, with the delinquency rate decreasing 11 basis points to 11.89 percent.

The percent of loans in foreclosure, also known as the foreclosure inventory rate, decreased from last quarter to 4.27 percent. The foreclosure inventory rate for prime fixed loans decreased 17 basis points to 2.42 percent and the rate for prime ARM loans decreased 45 basis points from last quarter to 8.31 percent. For subprime loans, the rate for subprime ARM loans decreased 43 basis points to 21.12 percent and the rate for subprime fixed loans decreased 33 basis points to 10.15 percent.  The foreclosure inventory rate for FHA loans increased 40 basis points to 4.23 percent while the rate for VA loans decreased 18 basis points to 2.28 percent.

The non-seasonally adjusted foreclosure starts rate decreased nine basis points for prime fixed loans to 0.53 percent, decreased 20 basis points for prime ARM loans to 1.55 percent, 15 basis points for subprime fixed to 1.98 percent, two basis points for subprime ARMs to 3.20 percent and 17 basis points for VA loans to 0.48 percent. The foreclosure starts rate increased 57 basis points for FHA loans to 1.53 percent.

Change from last year (second quarter of 2011)

Compared with the second quarter of 2011, the foreclosure inventory rate decreased 14 basis points for prime fixed loans, 85 basis points for prime ARM loans, 86 basis points for subprime fixed, 111 basis points for subprime ARM loans, two basis points for VA loans but increased 99 basis points for FHA loans.

Over the past year, the non-seasonally adjusted foreclosure starts rate decreased nine basis points for prime fixed loans, 27 basis points for prime ARM loans, 46 basis points for subprime fixed, 42 basis points for subprime ARM loans, increased 80 basis points for FHA loans and decreased seven basis points for VA loans.