NSA Delinquency Rates Fall

On a non-seasonally adjusted basis, the combined percentage of loans in foreclosure or at least one payment past due was 14.01% in the first quarter – a decline from 15.02% in the fourth quarter of 2009, according to the Mortgage Bankers Association's (MBA) National Delinquency Survey. The serious delinquency rate (i.e., the percentage of loans that are 90 days or more past due or in the process of foreclosure), was 9.54% – a decrease of 13 basis points (bps) from last quarter, but an increase of 230 bps from the first quarter of last year.

‘Overall, we see a continuation of the pattern of declines in short-term delinquency rates – at least on a non-seasonally adjusted basis – the continued historically high share of delinquencies that are 90 days or more past due, and a leveling off in the pace of foreclosures,’ says Jay Brinkmann, the MBA's chief economist.

The seasonally adjusted and non-seasonally adjusted rates show different stories this quarter, Brinkmann says. On a non-seasonally adjusted basis, the delinquency rate – which does not include loans in foreclosure – decreased 106 bps from the fourth quarter of 2009 to 9.38% this quarter. Seasonally adjusted numbers, however, show a 59-bp increase from the fourth quarter, resulting in a delinquency rate of 10.06%.

Brinkmann urges caution in viewing the seasonally adjusted numbers.

"The issue this quarter is that the seasonally adjusted delinquency rates went up, while the unadjusted rates went down,’ he says. ‘Delinquency rates traditionally peak in the fourth quarter and fall in the first quarter, and we saw that first-quarter drop in the data. The question is whether the drop represents anything more than a normal seasonal decline or a more fundamental improvement. Most importantly, the normal seasonal drop is coming right at the point where we believe delinquencies could potentially be declining and the problem for the statistical models is determining which is which.’

‘The seasonal models say it is not a fundamental improvement and that the seasonal drop should have been larger to represent a true improvement, hence the increase in the seasonally adjusted numbers,’ he continues. ‘Yet there is reason to believe the seasonally adjusted numbers could be too high. Simply put, fundamental market factors may be having a greater influence on the delinquency rates than is normally the case, but mathematical models have difficulty discerning the difference over a short period of time.’

Compared to last quarter, Washington, Maryland, Oregon and Georgia showed the greatest overall increases in foreclosures started. On a seasonally adjusted basis, the delinquency rate increased for all loan types, with the exception of Federal Housing Administration (FHA) loans. The non-seasonally adjusted delinquency rate fell for all loan types.

Given the challenges in interpreting the true seasonal effects in these data when comparing quarter-to-quarter changes, it is important to highlight the year-over-year changes, the MBA says.

Florida, Nevada, Arizona and California – the four ‘sand states’ that have long dominated national delinquency and foreclosure numbers – now make up a smaller share of problem loans, the survey shows. A year ago, the four states accounted for more than 45% of all foreclosure starts; now, they make up about 38% of all the nation's foreclosure starts.

About half of the states saw increases in the rate of foreclosure starts on a year-over-year basis, with the largest increases coming in Oregon, North Carolina and Maryland. The largest decreases were in Florida, Rhode Island and California.

Almost all of the states saw year-over year decreases in subprime adjustable-rate mortgage foreclosure starts, while almost all had increases in prime fixed-rate and FHA foreclosure starts.

SOURCE: Mortgage Bankers Association


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