Fifth Consecutive Drop Leaves Delinquency Rate at 2007 Levels

The delinquency rate for one-to-fourrnunit residential mortgages decreased for the fifth consecutive time in thernsecond quarter of 2014.  The resultingrnseasonally adjusted rate of 6.04 percent of all such loans outstanding was thernlowest since the fourth quarter of 2007. rnThe rate is down 7 basis points from the first quarter and is 92 basisrnpoints below the level in the second quarter of 2013.</p

The Mortgage Bankers Associationrnreleased these results from its National Delinquency Study on Thursday.  The delinquency rate includes loans that arern30 or more days past due but not yet in foreclosure.  Loans that are in foreclosure representedrn2.49 percent of mortgages in the second quarter, down 16 basis points from thernprevious period and 84 basis points from a year earlier.  It was the lowest foreclosure inventory raternsince the first quarter of 2008. </p

The serious delinquency rate, loans thatrnare 90 or more days past due or in foreclosure, was 4.80 percent, 24 basisrnpoints below the rate last quarter and 108 basis points lower than in the secondrnquarter of 2013.  Foreclosure starts inrnthe second quarter were at a rate of 0.40 percent, down from 0.45 percent andrnthe lowest rate since mid-2006.</p

Loans originated in 2007 and earlierrncomprised 75 percent of seriously delinquent loans.  Loans originated in 2011 and later accountedrnfor only six percent of seriously delinquent loans.</p<p"Delinquencyrnand foreclosure rates fell to their lowest levels in more than six years, andrnthe rate of new foreclosure starts is at its lowest level since 2006,” saidrnMike Fratantoni, MBA’s Chief Economist.   “Strong job growth andrncontinued increases in home prices in most markets have been the mainrncontributors to these steady improvements in mortgage performance.<br /<br /He said that a new trend that has emerged in the number of prime adjustablernrate mortgages (ARMs) serviced.  "Many ofrnthese are recently originated jumbo loans that are kept on banks' balancernsheets.  However a majority of outstanding prime ARM loans were originatedrnin 2007 and earlier and these loan vintages accounted for over 90 percent ofrnseriously delinquent prime ARM loans.  These older cohorts are keeping thernseriously delinquent numbers elevated despite the inflow of newer loans withrnstronger credit quality.”   <br /<br /Joel Kan, MBA's Director of Economic Forecasting said some states that werernhardest hit by the foreclosure crisis such as California and Arizona havernforeclosure inventory rates back to pre-crisis levels and less than half thernnational rate.  "On the other hand,rndespite declines last quarter, states with slower-moving judicial foreclosurernregimes, like New Jersey, Florida and New York, have foreclosure inventoryrnrates two to three times the national average.  There were 18 states withrna higher foreclosure inventory rate than the national average, and 15 of thosernwere judicial states.  Judicial states are also starting to see morernforeclosure starts than non-judicial states, whereas there used to be no clearrntendency for either foreclosure regime in the past quarters.”   <br /<br /Kan said MBA data shows that the seriously delinquent rate for FHA loans declinedrn43 basis points over the quarter and 135 basis points relative to last year,rnindicating continued improvement.  “The seriously delinquent rate for FHArnloans was the lowest since 2008 but still above the long run average of aroundrnfour percent.  The FHA foreclosure starts rate declined nine basis pointsrnto 0.55 percent and was at the lowest level since 2000, as well as below thernlong run average of 0.6 percent.”

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