MBA: Delinquency Rate Rises in First Quarter. Foreclosures Running At Record Pace

by devteam May 19th, 2010 | Share

The Mortgage Bankers Association today released the FirstQuarter 2010 National Delinquency Survey (NDS) results.

Seasonallyrnadjusted mortgage delinquency rates increased again during the first quarter ofrn2010, but a decrease in non-seasonally adjusted data is giving the Mortgage Bankers Association (MBA) reasonrnfor a little cautious optimism.

Thernsurvey's seasonally adjusted figures showed a 59 basis point increase in total delinquencies from the fourth quarter of 2009 to a rate of 10.06 percent of all loansrnoutstanding.  This represents an increase of 94rnbasis points from one year ago.  However, non-seasonally adjusted delinquencies decreased 106 basis points from 10.44 percent at the end of 2009 to 9.38 percent at the end of March. 

Therndelinquency rate includes loans that are at least one payment behind butrndoes not include loans in the process of foreclosure.  Loans in foreclosure represented 4.63 percentrnof all loans, an increase of five basis points from the fourth quarter of 2009rnand 78 basis points higher than one year earlier.  This is a record high foreclosure rate.  In addition, foreclosure actions were startedrnon 1.23 percent of loans compared to 1.20 percent last quarter, however, thisrnmetric was down from 1.37 percent in the first quarter of 2009.

Takenrntogether, loans in foreclosure and loans at least one payment late make uprn14.01 percent of all loans compared to 15.02 percent last quarter.

Jay Brinkmann, ChiefrnEconomist for MBA says, “The issue this quarter is that thernseasonally adjusted delinquency rates went up while the unadjusted rates wentrndown. Delinquency rates traditionally peak in the fourth quarter and fall inrnthe first quarter and we saw that first quarter drop in the data.  Thernquestion is whether the drop represents anything more than a normal seasonalrndecline or a more fundamental improvement.  Most importantly, the normalrnseasonal drop is coming right at the point where we believe delinquencies couldrnpotentially be declining and the problem for the statistical models isrndetermining which is which.”   

“The seasonal models say itrnis not a fundamental improvement and that the seasonal drop should have beenrnlarger to represent a true improvement, hence the increase in the seasonallyrnadjusted numbers.  Yet there is reason to believe the seasonally adjustedrnnumbers could be too high.  Simply put, fundamental market factors may bernhaving a greater influence on the delinquency rates than is normally the case,rnbut mathematical models have difficulty discerning the difference over a shortrnperiod of time. 

“Since discerning whatrnrepresents a fundamental improvement versus a simply seasonal improvement isrnprobably more of an art than a mathematical science at this point, thernseasonally adjusted numbers should be viewed with a degree of caution.”

Loansrnthat were 30+ days delinquent increased from 3.31 percent to 3.45 percent; thosern60+ days late increased from 1.54 percent to 1.59 percent, and seriouslyrndelinquent loans, those 90+ days in arrears, increased from 4.62 percent torn5.02 percent.

“Overall, we see arncontinuation of the pattern of declines in short-term delinquency rates, atrnleast on a non-seasonally adjusted basis,” Brinkmann said.  “The continued historically high sharernof delinquencies that are 90 days or more past due, and a leveling off in thernpace of foreclosures.

“The economy has begun torngenerate jobs and layoffs have declined, although new claims for unemploymentrninsurance remained higher in the first quarter than we expected.  The percentrnof loans behind one payment had been declining as first-time claims forrnunemployment began falling in March 2009.  Those new claims stoppedrnfalling during the first quarter of this year, which likely halted the declinernin the underlying 30-day delinquency rate.  If mortgage delinquencies arernnot yet clearly improving, it also appears they are not getting worse. However,rna bad situation that is not getting worse is still bad.

Primernloans overall had a delinquency rate of 7.32 percent (seasonally adjusted) comparedrnto 6.73 percent in the fourth quarter, however Prime ARMs had a rate nearlyrntwice that of Prime fixed-rate loans; 13.52 percent compared to 6.17rnpercent.  These rates were up 142 basisrnpoints and 57 basis points respectively from their fourth quarter levels. 27.21rnpercent of all subprime loans are in some stage of delinquency, up from 25.26rnpercent. Subprime FRM loans increased from 23.83 percent to 25.69 percent andrnsubprime ARMs jumped from 26.69 percent to 29.09 percent. Delinquencies of FHArnloans decreased slightly, from 13.57 percent in the fourth quarter to 13.15rnpercent while VA loan delinquencies increased from 7.41 percent to 7.96 percent.  All types of loans showed declines on arnnon-seasonally adjusted basis.   

Comparedrnon a year-over-year basis, the non-seasonally adjusted delinquency rate increased 151 basis pointsrnfor prime fixed loans, 172 basis points for prime ARM loans, 343 basis pointsrnfor subprime fixed loans, and 244 basis points for subprime ARM loans from thernfirst quarter of 2009. The delinquency rate was 48 basis points lower for FHArnloans and 12 basis points for VA loans relative to the same quarter a year ago.

The states with the highestrnoverall delinquency rates were Nevada (14.03 percent), Mississippi (12.70rnpercent), and Georgia (12.10 percent). rnThe highest inventory of foreclosures are in Florida (13.97 percent,)rnNevada (10.40 percent,) and New Jersey (6.17 percent); and the highest rates ofrnforeclosure were in Nevada (3.23 percent,) Florida (2.41 percent,) and Arizonarn(2.24 percent.)  Brinkmann noted that Florida,rnArizona, Nevada, and California have dominated the national picture for severalrnyears and that, while California is improving, Florida is getting worse.  Washington, Maryland, Oregon, and Georgiarnshowed the greatest overall increases in foreclosure starts compared to Q4rn2009.

The foreclosure starts raternincreased for all loan types with the exception of subprime loans. Thernforeclosure starts rate increased six basis points for prime fixed loans torn0.69 percent, 17 basis points for prime ARM loans to 2.29 percent, 18 basisrnpoints for FHA loans to 1.46 percent, and eight basis points for VA loans torn0.89 percent. For subprime fixed loans, the rate decreased nine basis points torn2.64 percent and for subprime ARM loans the rate decreased 39 basis points torn4.32 percent.

The delinquency surveyrncovers about 85 percent of the first-lien mortgages outstanding in thernU.S.  During the first quarter the surveyrncovered 44.4 million first mortgages on one-to-four family properties, a numberrnthat has decreased about 620,000 loans since the first quarter of 2009 andrn63,000 loans since the fourth quarter. 

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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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