According to a report by the Mortgage Bankers Association, the delinquency rate for mortgage loans on one-to-four-unit residential properties decreased to a seasonally adjusted rate of 8.22 percent of all loans outstanding as of the end of the fourth quarter of 2010. This marks a decrease from 9.13 percent from the previous quarter and 9.47 percent from the previous year.
The delinquency rate in this report includes loans that are at least one payment behind, but not loans that are in the foreclosure process. Although the percentage of loans in the foreclosure process at 4.63 percent is an increase from 4.39 percent from the previous quarter, the decline in the delinquency rate provides hope that there is a little light at the end of tunnel for the housing crisis. Additionally, the combined percentage of loans in foreclosures and delinquencies was a net 13.56 percent, a 22 basis point decline from the previous quarter.
The decline in the delinquency rate brought the percentage down to the lowest level since the end of 2008, with loans with only one payment past due reaching the lowest point since the end of 2007, considered the very beginning of the recession.
"While delinquency and foreclosure rates are still well above historical norms, we have clearly turned the corner," Jay Brinkmann, MBA's chief economist said. "Despite continued high levels of unemployment, the economy did add over 1.2 million private sector jobs during 2010 and, after remaining stubbornly high during the first half of 2010, first time claims for unemployment insurance fell during the second half of the year. Absent a significant economic reversal, the delinquency picture should continue to improve during 2011."
The percentage of loans that are in the foreclosure process remains at an all-time high, however, this increase is attributed to paperwork issues that many lenders and servicers were addressing in September and October that led to a temporary freeze of foreclosure activity. This may have delayed foreclosure starts, but it also delayed loans exiting the foreclosure process through some time of cure, short sale or foreclosure sale.