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Servicing

Mortgage delinquency rate dives lower: MBA

Rate hits lowest level since early 2008

home prices

The delinquency rate for mortgages on one-to-four unit residential properties fell 55 basis points from the second quarter of 2013, and 99 basis points from a year prior, the latest Mortgage Bankers Association National Delinquency Survey said.

The delinquency rate for mortgages in this category dropped to the lowest level since the second quarter of 2008 and sank to 6.41%.

This rate includes loans that are at least one payment past due, but it does not include loans in the process of foreclosure.

In addition, the percentage of loans on which foreclosure actions were started during the third quarter decreased to 0.61% from 0.64%, -- the lowest level since early 2007.

Also tumbling, the serious delinquent rate, the percentage of loans that are 90 days of more past due or in the process of foreclosure, hit 5.65%, a decrease of 23 basis points from last quarter.  

However, the trade firm did caution that reported improvement in the seriously delinquent percentages may be slightly less than stated because one large specialty servicer that has received a number of loan transfers does not participate in the MBA survey.

Furthermore, the combined percentage of loans at least one payment past due or in foreclosure posted the lowest level in five years, declining to 9.75% on a non-seasonally adjusted basis, which is 38 basis points lower than last quarter and 196 basis points lower than the same quarter one year ago.

Taking up most of the foreclosure pipeline, judicial states accounted for more than three times the number of loans in foreclosure than non-judicial states do, but the gap in their foreclosure inventory rates has narrowed in recent quarters.

“The degree to which the mortgage delinquency and foreclosure problem has changed over the last five years is perhaps best illustrated by the fact that last quarter New Jersey led the nation in the increase in the percentage of foreclosure actions filed, followed by Delaware, Maryland and Indiana. While Florida still leads the nation in the percentage of loans in foreclosure, that percentage is falling,” said Jay Brinkmann, MBA’s chief economist and senior vice president of research and education.

Brinkmann highlighted that with the improved rate, mortgage servicers are already reducing their staffs that handled delinquent loans and foreclosures and the MBA expects that trend to continue as the numbers continue to fall.

Additionally, while home prices have shown some considerable improvement, only in a small number of states are they back above their pre-2007 levels.

“Even if the economy continues to improve, those loans are more likely to proceed to foreclosure in the event of a divorce, illness or loss of a job because of lack of borrower equity. This will keep the foreclosure rates above historical norms for a few more years despite the strong credit standards of recent vintages,” Brinkmann said.

There has been considerable improvement on average and improvement in virtually every state, with the special factors holding back improvement dominated by local market factors, Mike Fratantoni, vice president of single-family research and policy development for the MBA, explained. 

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