MBA: Majority Of Seriously Delinquent Loans Originated Pre-2008

Mortgage delinquencies decreased to a seasonally adjusted rate of 6.04% of all loans outstanding at the end of the second quarter – a drop of seven basis points compared to the first quarter, according to the Mortgage Bankers Association's (MBA) National Delinquency Survey.

It was the fifth consecutive quarter that the delinquency rate fell, according to the MBA.

As of the second quarter, delinquencies had fallen to the lowest level since the fourth quarter of 2007, the MBA reports.

Looking just at prime fixed loans, the seasonally adjusted delinquency rate decreased nine basis points to 3.20%. Looking at adjustable-rate mortgages (ARMs), it increased 20 basis points to 5.28%.

For subprime fixed loans, the delinquency rate decreased 14 basis points to 18.66%. For subprime ARM loans, it decreased 142 basis points to 20.20%. For Federal Housing Administration loans, it fell by 15 basis points to 9.67%. For Veteran's Administration loans, the rate fell by 16 basis points to 5.25%.

The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 4.80% in the second quarter, a decrease of 24 basis points compared to the first quarter, and a decrease of 108 basis points from the second quarter of 2013. Similar to the first quarter, 75% of seriously delinquent loans were originated in 2007 or earlier. Loans with vintages started in 2011 and later accounted for only 6% of all seriously delinquent loans.

The percentage of loans in the foreclosure process at the end of the second quarter was 2.49%, down 16 basis points from the first quarter – 84 basis points lower compared to one year ago. This was the lowest foreclosure inventory rate seen since the first quarter of 2008, according to the MBA.

The percentage of loans on which foreclosure actions were started during the second quarter fell to 0.40% from 0.45%, a decrease of five basis points, and reached the lowest level since the second quarter of 2006.

‘Delinquency and foreclosure rates fell to their lowest levels in more than six years, and the rate of new foreclosure starts is at its lowest level since 2006,’ says Mike Fratantoni, chief economist for the MBA, in a statement. ‘Strong job growth and continued increases in home prices in most markets have been the main contributors to these steady improvements in mortgage performance.’

Fratantoni notes that among the prime ARM loans that were seriously delinquent in the second quarter, more than 90% were originated in 2007 or earlier.

‘These older cohorts are keeping the seriously delinquent numbers elevated despite the inflow of newer loans with stronger credit quality,’ he says.

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