Delinquency rates (on mortgages 30 or more days past due, but not in foreclosure) have been the brightest light in the gloomy foreclosure picture over the past year. Two new reports confirm that delinquencies are falling to pre-recession levels, a sign that the economy is steadily improving and the end of the foreclosure plague may be in sight.
Yesterday the Mortgage Bankers Association reported that the delinquency rate for mortgage loans on one-to-four-unit residential properties decreased to a seasonally adjusted rate of 8.22 percent of all loans outstanding as of the end of the fourth quarter of 2010, a decrease of 91 basis points from the third quarter of 2010, and a decrease of 125 basis points from one year ago. The non-seasonally adjusted delinquency rate decreased 46 basis points to 8.93 percent this quarter from 9.39 percent last quarter.
“These latest delinquency numbers represent significant, across the board decreases in mortgage delinquency rates in the US. Total delinquencies, which exclude loans in the process of foreclosure, are now at their lowest level since the end of 2008. Mortgages only one payment past due are now at the lowest level since the end of 2007, the very beginning of the recession. Perhaps most importantly, loans three payments (90 days) or more past due have fallen from an all-time high delinquency rate of 5.02 percent at the end of the first quarter of 2010 to 3.63 percent at the end of the fourth quarter of 2010, a drop of 139 basis points or almost 28% over the course of the year. Every state but two saw a drop in the 90-plus day delinquency rate and the two increases were negligible,” said Jay Brinkmann, MBA’s chief economist.
“While delinquency and foreclosure rates are still well above historical norms, we have clearly turned the corner. Despite continued high levels of unemployment, the economy did add over 1.2 million private sector jobs during 2010 and, after remaining stubbornly high during the first half of 2010, first time claims for unemployment insurance fell during the second half of the year. Absent a significant economic reversal, the delinquency picture should continue to improve during 2011,” Brinkmann said.
The mortgage data and analytics provider Lender Processing Services updated the MBA report by providing journalists a peak at its monthly mortgage report due out February 28.
In January, LPS said the delinquency rate was down 18.8 percent year over year and down 0.8 percent from December.
However, the 2011 foreclosure picture still looks gloomy. The LPS numbers include an extraordinarily high number of properties over 90 days delinquent, 2,168,000. These serious delinquencies account for nearly half of LPS’ total delinquency count of 4,719,000. That indicates continued high levels of foreclosures in the near term. LPS counts 6,922,000 properties that are 30 or more days delinquent or in foreclosure.