MBA: Delinquencies Down in All Categories But Subprime ARMs

by devteam November 19th, 2010 | Share

While foreclosurernstarts were up, the Mortgage Bankers Association’s (MBA) National Delinquency Surveyrnfor the third quarter reports significant improvement in most other foreclosurernmetrics.  For example, the delinquencyrnrate for one-to-four family residential loans dropped 72 basis points from thernsecond quarter to a seasonally adjusted rate of 9.13 percent.  This is also 51 basis points lower than inrnthe third quarter of 2009.  Therndelinquency rate measures loans that have missed one or more payments but doesrnnot include mortgages that are in foreclosure. rnWhen those are added, the overall rate is 13.78 percent, down from 13.97rnin the second quarter.  </p

Loans that were 90rnor more days delinquent or in foreclosure represented 8.70 percent of allrnloans; this is a decrease of 41 basis points from the second quarter and 15rnbasis points from figures in the third quarter of 2009.  This is the lowest rate of serious delinquencyrnsince the second quarter of 2009.  </p

The number of loansrnin foreclosure declined to 4.39 percent from 4.57 percent last quarter and 4.47rnpercent a year earlier, however new foreclosure actions were started during thernthird quarter on 1.34 percent of active loans, an increase of 23 basis pointsrnsince the previous quarter but eight basis points lower than in the thirdrnquarter of 2009.  Foreclosure startsrnincreased for all loan types and prime FRMs set a new record high in thernsurvey.</p

Michael Fratantoni,rnMBA’s Vice President of Research and Economics said, “We have frequentlyrnobserved that there can be a tradeoff between 90+ day delinquencies andrnforeclosure starts.  That happened this quarterrnas the foreclosure start rate increased, the mirror image of the decline in thern90+ delinquency rate, although for both prime and subprime loans, bothrnforeclosure starts and 90+ delinquency rates increased from last quarter.  Loans that are 90 days or more late remainrnthe largest proportion of delinquencies with the 90+ rate still almost fourrntimes greater than the average of about 1.1 percent over the past 20rnyears.”</p

“Thernforeclosure paperwork issues announced by several large servicers in laternSeptember and early October are unlikely to have had a large impact on thernthird quarter numbers, but may well increase the foreclosure inventory numbersrnin the fourth quarter of 2010 and in early 2011″ Fratantoni said.  “Any drop in foreclosure sales over thernnext few quarters may actually reduce the inventory of homes on the market,rnwhich is still quite swollen, with almost 4 million properties currentlyrnlisted.  However, these foreclosed homesrnare likely to come on the market in the medium term, so it is only a delayrnrather than a change in the underlying economics.”</p

The delinquencyrnrates decreased from the previous quarter for all loan types except subprimernARM loans.  Seasonally adjusted rates (inrnpercentages) for the various loan types were: rnprime FMR, 5.17; prime ARM, 13.31; subprime FRM, 23.84; subprime ARM,rn29.80; FHA, 12.62; VA, 7.44.  The reportrncautions, however, that given the difficulty of interpreting the true seasonalrneffects of quarter to quarter changes, it is important to also consider yearrnover year changes.  Since the thirdrnquarter of 2009, the non-seasonally adjusted delinquency rate decreased 40rnbasis points for prime FRM, 64 basis points for subprime FRM; 182 basis pointsrnfor FHA loans, and 65 basis points for VA loans.  The rate was up 91 basis points for prime ARMrnloans and 131 basis points for subprime ARM loans.</p

Foreclosure startsrnincreases year over year by 22 basis points for prime FRMs, 11 basis points forrnsubprime FRM but decreased 109 basis points for prime ARMs, 83 basis points forrnsubprime ARM loans, seven basis points for FHA loans and one basis point for VArnloans.</p

Of 33 states notingrnincreases in the rate of foreclosure starts year over year, Washington,rnIndiana, and South Carolina had the largest. rnThe largest decreases were in Nevada, California, and Florida butrnFlorida and Nevada still have the highest percentages of foreclosure starts andrnloans in foreclosure across most loan types.  

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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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