The Mortgage Bankers Association released its National Delinquency Survey today, which found that the rate of foreclosure starts and the percent of loans in the process of foreclosure are at the highest levels ever -- while the nation's total delinquency rate is the highest in the MBA survey since 1986. The delinquency rate for mortgage loans on one-to-four-unit residential properties stood at 5.59 percent of all loans outstanding in the third quarter of 2007 on a seasonally-adjusted basis, up 47 basis points from the second quarter of 2007, and up 92 basis points from one year ago, the MBA said. Outside of delinquency, the trade organization reported that the percentage of loans in the foreclosure process was 1.69 percent of all loans outstanding at the end of the third quarter, an increase of 29 basis points from the second quarter of 2007 and 64 basis points from one year ago. The press statement contained some very important insight [emphasis added]:
The increase in foreclosure starts was due to increases for all loan types. From the previous quarter, prime fixed rate loan foreclosure starts increased 4 basis points to 0.22 percent, prime ARM foreclosure starts increased 40 basis points to 1.02 percent, subprime fixed foreclosure starts increased 3 basis points to 1.38 percent, subprime ARM foreclosure starts increased 88 basis points to 4.72 percent, and FHA foreclosure starts increased 16 basis points to 0.95 percent.
That foreclosures are up across the board -- the MBA said that more than 35 percent of foreclosure starts in the third quarter represented prime borrowers -- should signal just how limited the effect of the subprime ARM rate freeze will likely be. We're well past the point of this being just a subprime issue, or just a reset issue. The MBA characterized the overall rise in delinquency and foreclosures "predictable," and said that third quarter statistics represented the first full quarter to capture the seize-up in the secondary markets and it credit availability for many borrowers.