Huge Spike in Delinquencies Chalked up to Seasonal Factors

Thernheadline news from the Lender Processing Services (LPS) MortgagernMonitor Report for June, thatrnearly mortgage delinquencies had surged 10 percent during the month,rnwas released two weeks ago in LPS’s regular “first look” at itsrnmonthly data. The full report, released this morning, added somerndetails to that announcement.</p

Thernsudden increase, which LPS Applied Analytics Senior Vice PresidentrnHerb Blecher called “representatives of a documented seasonalrnphenomenon,” brought the national delinquency rate from 6.08 in Mayrnto 6.68 percent in June, an increase of 9.9 percent. The rate isrnstill down 6.9 percent from the beginning of the year and 6.5 percentrnfrom June 2012. The rate of foreclosures and of seriously delinquentrnloans continued their decline.</p

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Therernwere 700,000 newly delinquent loans in June and they were widelyrndispersed geographically with every state but Vermont, for which norninformation was supplied, experiencing double-digit increases. The<bbiggest jump occurred in two western states – Colorado which was uprn31,7 percent and Utah with a 29.6 percent increase in 30+ dayrndelinquencies. </p

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Delinquenciesrnincreased for both fixed rate and adjustable-rate mortgages. Thernformer jumped 19 percent from May and the latter 18 percent.</p

Blecherrnexplained the seasonal nature of the increase. “Over thernlast 18 years, similar changes occurred in June for all but four ofrnthose years. And this month’s increase was felt across all 50rnstates — from a roughly 14 percent month-over-month rise in 30-dayrndelinquencies in Nevada to a nearly 32 percent upswing in Colorado.rnAdditionally, we examined the data to see the effect of recentrnincreases in interest rates on delinquency rates and found nornsignificant impact thus far. Adjustable-rate mortgages (ARMs), whichrnone would expect to be impacted most by such interest rate changes,rnactually saw delinquency rates rise at a lower relative rate thanrnthose of fixed-rate mortgages.</p

“Ofrncourse, focusing solely on month-to-month shifts in mortgagernperformance can be like tracking the stock market on a daily basis,”rnBlecher continued. “You may see periodic spikes and dips, butrnwithout a longer-term perspective, you lack a clear picture of howrnthe market is actually performing. Though June’s 9.9 percent spikernwas indeed significant — and a reversal of five consecutive monthsrnof declines — on a quarterly basis, the rise was much more moderate</bthan the historical average. Since 1995, delinquency rates have risenrnfrom Q1 to Q2 in all but two years, with an average 7 percentrnincrease. By comparison, the 2013 Q1 to Q2 increase was just 1.34rnpercent."</p