The national delinquency rate for mortgages on one-to-four-unit residential properties fell to a seasonally adjusted rate of 6.41% of all loans outstanding at the end of the third quarter of 2013 – the lowest level since the second quarter of 2008 – according to the Mortgage Bankers Association's (MBA) National Delinquency Survey.
The delinquency rate – including loans that are more than 30 days past due but not yet in foreclosure – dropped 55 basis points in the third quarter compared to the second quarter, and 99 basis points from the third quarter of 2012, the MBA reports.
About 3% of mortgages were in some stage of the foreclosure process at the end of the third quarter – down 25 basis points from the second quarter and down 99 basis points from the third quarter of 2012. The foreclosure inventory rate in the third quarter also reached its lowest point since 2008.
The percentage of loans on which foreclosure actions were started during the third quarter was 0.61% – a drop of three basis points compared to the second quarter, when they were 0.64%. This was lowest level seen since early 2007, the MBA says.
The serious delinquency rate – mortgages that are 90 days or more past due or in the process of foreclosure – was 5.65% in the third quarter – a decrease of 23 basis points from the second quarter and a decrease of 138 basis points from the third quarter of 2012.
The MBA notes, however, that the percentage of seriously delinquent mortgages reported may, in fact, 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.’
‘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,’ says Jay Brinkmann, chief economist and senior vice president of research and education at the MBA. ‘While Florida still leads the nation in the percentage of loans in foreclosure, that percentage is falling. In contrast, New York and New Jersey were the only two states that saw an increase in the percentages of loans in foreclosure.’
Brinkmann notes that states with judicial foreclosure systems ‘still account for most of the loans in foreclosure.’
‘While the percentages of loans in foreclosure dropped in both judicial and nonjudicial states, the average rate for judicial states was 5.28 percent – more than triple the average rate of 1.66 percent for non-judicial states,’ he says.
Brinkmann also notes that many mortgage servicers are now reducing staff in light of declining delinquencies and foreclosures – and that the trend would likely continue into next year.
‘Also, while home prices have shown some considerable improvement, in only a small number of states are they back above their pre-2007 levels,’ he says. ‘This is noteworthy because roughly three-quarters of all seriously delinquent loans were originated in 2007 or earlier. So, 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.’