The delinquency rate for mortgage loans on one-to-four-unit residential properties decreased to a seasonally adjusted rate of 5.68% of all loans outstanding at the end of the fourth quarter of 2014.  

This was the lowest level since the third quarter of 2007. The delinquency rate decreased 17 basis points from the previous quarter, and 71 basis points from one year ago, according to the Mortgage Bankers Association’s National Delinquency Survey.

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 in the foreclosure process at the end of the fourth quarter was 2.27%, down 12 basis points from the third quarter and 59 basis points lower than the same quarter one year ago.  This was the lowest foreclosure inventory rate seen since the fourth quarter of 2007.

“Delinquency rates and the percentage of loans in foreclosure decreased for another quarter and were at their lowest levels since 2007,” said Marina Walsh, MBA’s Vice President of Industry Analysis.  “We are now back to pre-crisis levels for most measures.”

The percentage of loans on which foreclosure actions were started during the fourth quarter was 0.46%, an increase of two basis points from the previous quarter, but was eight basis points below the level of the fourth quarter of 2013. 

The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 4.52%, a decrease of 13 basis points from last quarter, and a decrease of 89 basis points from the fourth quarter of 2013. 

“The foreclosure inventory rate has decreased every quarter since the second quarter of 2012, and is now at the lowest level since the fourth quarter of 2007. Foreclosure starts ticked up two basis points, after being flat last quarter, largely due to state-level fluctuations in the speed of the foreclosure process. Compared to the same quarter last year, foreclosure starts are down eight basis points,” Walsh said.

“At the state level, 45 states saw a decline in their foreclosure inventory rates over the quarter, although judicial states continue to account for a disproportionately high share. Fewer than half the states had an increase in non-seasonally adjusted 30 day delinquencies, which is highly seasonal and usually increases in the fourth quarter. Foreclosure starts increased in 28 states, but this has become more volatile, with recent state-level mediation requirements and changing laws, as well as servicer procedures, dictating the changes from quarter to quarter,” she said.

Legacy loans continue to account for the bulk of all troubled mortgages.  Within loans that were seriously delinquent (either more than 90 days delinquent or in the foreclosure process), 73% of those loans were originated in 2007 and earlier. More recent loan cohorts, specifically loans originated in 2012 and later, continue to exhibit low serious delinquency rates.

 “We expect the improvement in mortgage performance to continue due to the improving economy and a strengthening job market, and the improved credit quality of recent vintages,” Walsh said.