More than one out of every nine home loans in the U.S. is delinquent, according to a report released by the Mortgage Bankers Association (MBA) on Friday.
The rate of residential mortgage delinquencies fell in the fourth quarter 2009 to a seasonally-adjusted rate of 9.47% of all mortgages. Non-adjusted, the fourth quarter delinquency rate was 10.44%, up 50 basis points from 9.94% in the third quarter. Loans are considered as delinquent by the MBA survey when at least one payment is past due but not yet in the process of foreclosure.
If we count the percentage of loans that are either delinquent or in the process of foreclosure, the numbers looks even worse – at 15.02% – and reach the highest percentage ever recorded by the Mortgage Bankers Association.
While the percentage of loans 90 days or more past due and loans in foreclosure have set record new highs, the percentage of loans 30 days past due is still below the record that was set in the second quarter of 1985.
Florida continues to be the worst state in terms of delinquencies; 26% of Florida mortgages were one payment or more past due as of December 31st. 20.4% of Florida mortgages are 90 days or more past due or already in the process of foreclosure. Nevada follows closely for second worst with 24.7% of its mortgages one payment or more past due, and 19% of the loans are 90 days or more past due or in foreclosure.
Jay Brinkmann, MBA’s chief economist, said that despite these high percentages of delinquencies and foreclosures, the housing market may be ready for a turnaround.
“The continued and sizable drop in the 30-day delinquency rate is a concrete sign that the end may be in sight,” Brinkmann said. “We normally see a large spike in short-term mortgage delinquencies at the end of the year due to heating bills, Christmas expenditures and other seasonal factors. Not only did we not see that spike but the 30-day delinquencies actually fell by 16 basis points from 3.79% to 3.63%,” he said.
Brinkmann said that the non-seasonally adjusted 30-day delinquency rate has dropped between the third and fourth quarters only three times before in the history of the MBA survey – and never by this magnitude. He said there should be an even steeper drop in the end of March data if the normal seasonal patterns hold for the first quarter.
“This drop is important because 30-day delinquencies have historically been a leading indicator of serious delinquencies and foreclosures,” Brinkmann said. “With fewer new loans going bad, the pool of seriously delinquent loans and foreclosures will eventually begin to shrink once the rate at which these problems are resolved exceeds the rate at which new problems come in. It also gives us growing confidence that the size of the problem now is about as bad as it will get.”
Brinkmann said that a drop in the rate of new foreclosures also looks promising, but warns that the drop may be only temporary because of the large increases in loan delinquencies that are 90 days or more past due.
“Typically, 30-day delinquencies account for the largest share of all delinquencies. That is no longer the case. Loans 90 days or more past due now account for half of all delinquencies, the highest share in the history of the MBA survey and double the share only two years ago. If we include loans already in foreclosure in those totals, seriously delinquent loans are now 64% of all non-current loans.
“Despite the drop in short-term delinquencies, foreclosure rates could continue to climb, however, based on the ability of borrowers 90 days or more delinquent to solve their problems. A sizable number of the loans in the 90+ day delinquent bucket are in loan modification programs. They are carried as delinquent until borrowers demonstrate they will make the payments agreed to in the plans.
“The pattern of mortgage delinquencies now very much follows the pattern of unemployment. Just as short-term delinquencies have fallen during the latter part of 2009, first-time claims for unemployment insurance have declined by about a third since their peak in March 2009. Just as long-term delinquencies now dominate total mortgage delinquencies, long-term unemployment now dominates the total unemployment number.
“People who have been unemployed for six months or more now constitute over 40% of the total unemployed, the highest share in the history of the unemployment survey. In addition, over the last several months we have seen a large number of people simply drop out of the work force, many who are discouraged about being able to find work.
“Until the issue of this large segment of long-term unemployed is resolved, many of the longer-term mortgage delinquencies will remain a problem with a strong likelihood of turning into foreclosures,” Brinkmann said.
Source:
Mortgage Bankers Association
