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Mortgage Delinquency Report (MBA) 4Q 08

(March 5, 2009 Release)

Highlights

• Mortgage delinquency rates surged 89 basis points to a record high in the fourth quarter to 7.88 percent from the third quarter.
• 1.08 percent of mortgages entered foreclosure in the fourth quarter, up 1 basis point from the third quarter.
• The total delinquency rate in the fourth quarter of 2008 was 206 basis points higher than the 5.82 percent delinquency rate in the fourth quarter of 2007.
• The delinquency rate rose for both fixed rate and adjustable rate prime mortgage loans.

MBA Mortgage Delinquency Rates
Q4 08 Q3 08 Q2 08 Q1 08
Delinquencies
All Loans 7.88 6.99
Prime Fixed Rate 3.9 3.3 3.1 2.8
Prime ARM 9.7 8.2 7.5 6.8
Subprime Fixed Rate 19.4 18.0 16.0 15.4
Subprime ARM 24.2 21.3 21.0 22.1
Percent in Foreclosure
All Loans 1.08 1.07
Prime Fixed Rate 0.4 0.3 0.4 0.3
Prime ARM 1.7 1.9 1.9 1.5
Subprime Fixed Rate 2.2 2.2 2.3 1.8
Subprime ARM 5.4 6.4 7.1 6.3

Source: Mortgage Bankers Association

Analysis

Delinquency rates rose significantly in the fourth quarter while foreclosure rates hovered near third quarter levels. This was somewhat expected given that many states and local governments and Fannie Mae and Freddie Mac imposed moratoriums on foreclosure proceedings during the quarter. With less properties entering foreclosure, more households became delinquent on their mortgage loans, particularly in the 90 day category.

The substantial rise in delinquency rates portends unfavorably for future foreclosures (once the moratoriums are lifted) and for conditions in the housing sector in general. A deteriorating job market suggests that delinquency rates could rise into the first quarter of this year. As long as our economy remains in recession, the delinquency and foreclosure situations remain fragile, to say the least.

One comment

  1. In an interest-only loan or the wreoobrr only pays interest each month. This makes it cheaper than a conventional mortgage, in which part of each month’s payment goes towards the principal and part goes towards interest. These loans have become popular because the monthly payments are lower, allowing wreoobrrs to afford a larger home.However, these loans can be dangerous, especially in a down housing market. The interest rates are generally fixed for the first 1, 3 or 5 years. After that, they convert to a conventional loan, with a higher monthly payment. Most wreoobrrs take on these loans because they assume they will sell the home before the interest rate increases. In a down market, they may not be able to sell. If they cannot afford the increased payment, they may have to default on the loan, and foreclose on the home. So, when the rate starts to adjust, you would need to refinance again. And, either get a fixed or another interest only adjustable. And, yes, I do believe you mean ARM. Although, if you have extra money every so often, you can pay down the principal in extra payments.

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