Continued Signs of Improvement: Mortgage Delinquencies Down

There was a lot of good news in the Fourth Quarter National Delinquency Study released by the Mortgage Bankers Association (MBA) Thursday. First, the overall, seasonally adjusted delinquency rate (which does not include loans in foreclosure) fell to 8.22 percent, a decrease of 91 basis points from a 9.13 percent rate in the third quarter and down 125 basis points from the same period in 2009. Jay Brinkmann, MBAs chief economist said that the non-seasonally adjusted rate showing a decrease of 46 basis points to 8.93 percent might be even better news. There is usually a sharp spike in the rate in the fourth quarter, perhaps because homeowner’s budgets are impacted by the first home heating bills of the season. That the rate fell this time indicates that the downward movement may be real.

Delinquencies were down across all stages but one. Loans in the 30+ day bucket had a delinquency rate of 3.25 percent, down from 3.36 percent in the third quarter and 3.31 percent a year earlier. This rate, in fact, returns 30 day delinquencies to a pre-recession level. Loans delinquent 60+ days decreased 1.44 percent in the third quarter to 1.34 percent. The rate was 1.60 percent a year earlier. Loans in the 90+ bucket decreased from 4.34 percent to 3.63 percent quarter-over-quarter. One year earlier the 90+ rate was 4.62 percent. Loans seriously delinquent or in foreclosure had a rate of 8.57 percent compared to 8.70 percent a quarter earlier and 9.67 percent in the fourth quarter of 2009.

Foreclosure starts were down from 1.34 percent in the third quarter to 1.27 percent, but the new figures were seven basis points higher than a year earlier. The foreclosure inventory was up from 4.58 percent in Q4 2009 and 4.39 percent in Q3 2010 to 4.63 percent in the most recent survey. Brinkmann said much of the increase is probably due to process issues with loans working through the system.

The improvement in delinquencies holds across loan types as well, with the rate for all prime loans and all subprime loans decreasing for the third consecutive quarter. Prime loans now have a delinquency rate of 5.48 percent, down from 6.29 percent in Q3 and subprime are at 23.01, a decrease of 322 basis points. There were slight increases in foreclosure starts for subprime and VA loans and Prime ARMs.