The delinquency rate for mortgage loans on one-to-four-unit residential properties rose to a seasonally adjusted rate of 7.88% of all loans outstanding as of the end of the fourth quarter of 2008, up 89 basis points (bps) from the third quarter of 2008, and up 206 bps from one year ago, according to the Mortgage Bankers Association's (MBA) National Delinquency Survey.
The delinquency rate breaks the record set last quarter, and the quarter-to-quarter jump is the also the largest. The records are based on MBA data dating back to 1972.
The delinquency rate includes loans that are at least one payment past due but does not include loans somewhere in the process of foreclosure. The percentage of loans in the foreclosure process at the end of the fourth quarter was 3.30% – an increase of 33 bps from the third quarter of 2008 and 126 bps from one year ago. The percentage of loans on which foreclosure actions were started during the fourth quarter was 1.08% – up one bps from last quarter and up 20 bps from one year ago.
‘Foreclosure inventory jumped sharply in the fourth quarter, even though the rate at which loans were entering foreclosure remained unchanged,’ says Jay Brinkmann, MBA's chief economist and senior vice president for research and economics. ‘This is mainly attributable to various state and local moratoria on foreclosure sales, the Fannie Mae and Freddie Mac halt on foreclosure sales announced in late November, a general reluctance by servicers to proceed with evictions in the last few weeks of December and a slowing down caused by an overburdened legal process in some areas."
Exotic products are leading delinquency rates, as 48% of subprime adjustable-rate mortgages nationwide were at least one payment past due, Brinkmann points out. The MBA projects future delinquencies will be more closely tied to the weakening economy and growing unemployment rate, not a mortgage's underwriting quality.