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Delinquencies Up On Seasonal Factors, Pre-2010 FHA Loans Underperform
The National Delinquency Survey for thernfirst quarter of 2013 shows an increase in delinquencies of 16 basis points (bps)rnto a seasonally adjusted rate of 7.25 percent for all outstanding one-to-fourrnfamily mortgage loans. The survey defines a loan as delinquent if it is onernpayment or more past due but not yet in foreclosure. The Mortgage Bankers Association (MBA) saidrnthis was a 15 bps improvement in the rate from the first quarter of 2012.</p
MBA said that non-seasonally adjustedrndelinquency rates typically decrease between the fourth quarter of one year andrnthe first quarter of the next and this year the unadjusted rate did drop 76 bpsrnto 6.75 percent. It was also 19 bpsrnlower than the rate of 6.94 percent in the first quarter of last year.</p
The rate of loans for which foreclosurernwas started during the quarter was unchanged at 070 percent, down 26 bps fromrnthe first quarter last year and tied for the lowest rate since the secondrnquarter of 2007. At the end of the firstrnquarter the rate of loans in some stage of foreclosure was 3.55 percent, thernlowest level since 2008, down 19 and 84 bps quarter-over-quarter andrnyear-over-year respectively.</p
Serious delinquencies, loans that are 90 or more days past due or in foreclosurerndecreased to 6.39 percent, down 39 bps from the fourth quarter and105 bps fromrnQ1 2012. The aggregate of loans that arernpast due or in foreclosure equate to a rate of 10.30 percent, 95 bps lower thanrnthe fourth quarter, 103 bps below the rate a year earlier, and the lowest raternin over four years. </p
Michael Fratantoni, MBA’s Vice President of Research and Economics said, “Onrna seasonally adjusted basis, the overall delinquency rate increased thisrnquarter, driven by a slight increase in the 30-day delinquency rate. Normalrnseasonal patterns are beginning to re-emerge, but as has been true post-crisis,rnit is still difficult to parse typical seasonal swings from true changes inrnperformance. It is also important to note the decline relative to lastrnyear at this time. Regardless, we remain in a period of slow and unevenrneconomic and job growth in the US and there are still many borrowers withoutrnstable, full time employment, or that are still unemployed. On a seasonallyrnadjusted basis the largest increases in delinquency were in the subprime fixedrnand ARM categories, typically sensitive to income and payment shocks, andrnlikely even more so in the current economic environment.” </p
“We are seeing substantial improvements in the foreclosure situation</strongnationally and in many states. The foreclosure inventory measurerndecreased in 40 states, with states like Florida, California, and Nevadarnleading the declines. However, 33 states had increases in foreclosure starts,rnwhile the pace of decline in the 90+ day category has slowed in recentrnquarters, the 90+ day measure is now at its lowest since 2008. As with lastrnquarter's results, the reported improvement in the foreclosure situation may bernslightly larger than stated because some large specialty servicers are not yetrnparticipating in the MBA survey."</p
Rates were mixed across loan types with prime fixed and adjustable raternloans decreasing 2 bps and 40 bps to 3.77 percent and 7.62 percent respectively. Subprime loans increased by 97 bps for fixedrnloans and 138 bps for ARM loans. Bothrncategories of subprime loans still have delinquency rates in excess of 20rnpercent. VA loan delinquencies increasedrnby 37 bps to 6.34 percent while the FHA rates dropped by 20 bps to 10.97rnpercent.</p
The foreclosure inventory rate (loans in some process of foreclosure) was 3.55rnpercent for all loans. The rate forrnprime fixed loans fell 12 bps from the previous quarter to 1.98 percent and thernrate for prime ARM loans dropped 73 bps to 5.95 percent. Subprime ARM loansrndecreased 197 bps to 16.27 percent and subprime fixed loans decreased 54 bps torn8.74. The foreclosure inventory rate for FHA loans increased 11 bps to 3.96rnwhile the rate for VA loans decreased 10 bps to 1.98.</p
Fratantoni said, “FHA loans, like most of thernother loan categories, saw an improvement in delinquencies. However, itrnwas the only loan type that had increases in foreclosure starts andrninventories, which increased eight basis points and 11basis points respectively. The pre-2010 vintages continue to drive FHA seriousrndelinquencies, with the 2008 and 2009 loan cohorts still accounting for 44rnpercent of seriously delinquent FHA loans even though they represent only 27rnpercent of FHA loans serviced. In contrast, the 2010 and later vintages made uprn15 percent of seriously delinquent FHA loans, but are almost half of all FHArnloans serviced. Foreclosure starts and inventory rates on subprime loansrndropped sharply over the quarter and relative to last year.” </p
MBA stressed that it is important to look at year over year changes ofrnnon-seasonally adjusted results as well as quarter-to-quarter changes. Compared with the first quarter of 2012, thernforeclosure inventory rate decreased 61 bps for prime fixed loans, 281 bps forrnprime ARM loans, 174 bps for subprime fixed, 528 bps for subprime ARM loans,rnand 48 bps for VA loans while increasing 13 bps for FHA loans.</p
Over the past year, thernnon-seasonally adjusted foreclosure starts rate decreased 24 bps for primernfixed loans, 81 bps for prime ARM loans, 41bps for subprime fixed, 91 bps for subprimernARM loans, two bps for FHA loans and 16 bps for VA loans.</p
Fratantoni pointed to states with arnjudicial foreclosure system saying they continue to have a disproportionate sharernof the foreclosure backlog. “While the average percentages of loans inrnforeclosure dropped in both states with judicial systems and states withrnnonjudicial systems, the average rate for judicial states was 5.96 percent,rntriple the average rate of 1.99 percent for nonjudicial states. Both declinedrnto recent lows, with judicial states seeing the lowest foreclosure inventoryrnsince the fourth quarter of 2009 and nonjudicial states seeing the lowestrnforeclosure inventory since the fourth quarter of 2007.”</p
Fratantoni said that the three statesrnaffected by Superstorm Sandy, New York, New Jersey, and Connecticut, sawrndecreases in their total past due loans during the quarter even thoughrnservicers had been instructed to report these loans as they were actuallyrnperforming. Foreclosure starts which hadrndeclined last quarter in New Jersey, possibly because servicers had suspended allrnforeclosure activity rebounded in the first quarter, likely on properties notrnaffected by the storm. He said MBArnexpects further improvement in those state in future quarters.
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Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.
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