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Mortgage Delinquencies Continue to Rise

Delinquencies in commercial and multi-family residential mortgages continued to rise during the first quarter of 2009 due to the weak economy and an ongoing credit crunch, according to a report released on Tuesday by the Mortgage Bankers Association (MBA).

Jamie Woodwell, Vice President of Commercial Real Estate Research at the Mortgage Bankers Association, said, “Delinquency rates on commercial and multifamily mortgages held by banks and thrifts, by Fannie Mae and in commercial mortgage-backed securities (CMBS) are all now at levels higher than those seen following the 2001 recession. First quarter delinquency rates on commercial mortgages held by life insurance companies remained below the 2001 recession levels.”

The MBA analysis looks at commercial/multifamily delinquency rates for five of the largest investor-groups: commercial banks and thrifts, commercial mortgage-backed securities (CMBS), life insurance companies, Fannie Mae and Freddie Mac. Together these groups hold more than 80 percent of commercial and multi-family mortgage debt outstanding.

The 30+ day delinquency rate on loans held in CMBS rose .68 percentage points to 1.85% between the fourth quarter of 2008 and the first quarter of 2009. The 60+ day delinquency rate on mortgages held in life insurance company portfolios rose .05 percentage points to .12%.

The 60+ delinquency rate on multi-family residential loans held or insured by Fannie Mae rose .04 percentage points to .34%. The rate of loans held or insured by Freddie Mac that are 90+ days delinquent rose .08 percentage points to .09%. The 90+ delinquency rate on loans held by FDIC-insured banks and thrifts rose .66 percentage points to 2.28%.

Homeowners also continue to have difficulty in making their mortgage payments, according to a separate report released by TranUnion earlier this week. Residential mortgage loan delinquencies that are 60+ days past due increased for the ninth straight quarter.

Delinquencies that are 60+ days overdue are traditionally regarded as a precursor to foreclosure since it is often very difficult for families to come up with two months' mortgage payments at once. Year-over-year, mortgage loan delinquency is up approximately 62%.

In the first quarter of 2009, the national average delinquency rate is 5.22%. This is up almost 14% from the previous quarter's 4.58% average, after an increase of 16% from the third quarter to the fourth quarter of 2008.

The mortgage delinquency rate in the first quarter of 2009 was highest in Nevada at 11.61%, followed by Florida at 11.01%, while the states with the lowest delinquency rate for that quarter were North Dakota at 1.51%, South Dakota at 1.94%, and Alaska at 2.14%.

Certain metropolitan areas are leading the nation in delinquency rates: Miami, FL tops the list at 16.39%; Fort Myers, FL at 15.28%; Merced, CA at 15.24%; Stockton, CA at 13.92%; and Naples, FL at 13.01%.

The states with the highest percentage of growth in delinquencies from the previous quarter were Hawaii at 34.4%, Oregon at 30.7%, and Nevada at 28.9%. Nebraska had a 4.7% decline in delinquency rates, and delinquencies in South Dakota were down 1.5% from the previous quarter.

At the national level, the average mortgage debt per borrowers rose 1.41% to $195,500 from the previous quarter's $192,789. The average mortgage debt is an increase of 1.87% from a year ago when it was $191,917.

California still has the highest average mortgage debt at $365,192, followed by the District of Columbia at $360,217 and Hawaii at $314,269. The lowest average mortgage debt per borrower was in West Virginia at $97,187.

Quarter to quarter, Rhode Island showed the greatest percent increase in mortgage debt at 5%, followed by Ohio at 4.9%, and Idaho at 4.5%. Illinois had a 2.5% drop in average mortgage debt, the average debt dropped by 2.1% in Alaska, and by .78% in Iowa.

Keith Carson, a senior consultant in TransUnion's financial services group said, "The troubling news is that the mortgage delinquency rate continues to climb upward at an average quarterly pace almost doubling that experienced in the last recession."

Carson explained that the recession that lasted from March through November of 2001 saw an average quarter-to-quarter delinquency growth rate of 6.5%, compared to the 12% quarter-to-quarter delinquency growth rate in the current recession.

"However, this quarter's results offer a glimmer of hope and a chance for optimism," he continued. "For the first time since the recession began at the end of 2007, the quarterly growth rate for national mortgage delinquency decreased. On a state basis, for example, Florida's quarterly growth rate for mortgage delinquency went down from 22% in the fourth quarter of 2008 to almost 16% in the first quarter of this year. While this may sound like trying to make good news out of bad, in fact it is an indication that we may be currently working our way through the worst of the recession."

Carson said that the economy has shown some "pockets of promising news" but that unemployment and deflated home prices will continue to push up the delinquency rate through the rest of the year.

He also said that Florida's delinquency rate is likely to continue to increase and may even reach as high as 18% by the end of the year. North Dakota is expected to keep the lowest delinquency rate in the nation, topping out in mid 2009 and then declining to just over 1.5% by the year's end.


Sources:
Mortgage Bankers Association
TransUnion
Unemployment Rate at 9.4% for May 2009
Pending Home Sales up 6.7% in April 2009
 

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Sunday, 24 February 2019