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Residential Department: DataDecoded: October 2012



Delinquencies tick upward, but foreclosures still down

Mortgage delinquencies increased and foreclosures decreased this past second quarter, according to the second-quarter National Delinquency Survey released by the Mortgage Bankers Association (MBA).

The delinquency rate for mortgage loans on one-to-four-unit residential properties increased to a seasonally adjusted rate of 7.58 percent of all loans outstanding, an increase of 18 basis points from this past first quarter, but a decrease of 86 basis points from one year ago. The non-seasonally adjusted delinquency rate increased 41 basis points to 7.35 percent this past second quarter from 6.94 percent the previous quarter. Delinquency rates typically increase between the first and second quarters of the year, however.datadecoded_10-12

The percentage of loans on which foreclosure actions were started this past second quarter was 0.96 percent, unchanged from the first quarter and from one year ago. In MBA’s survey, the delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure.

The percentage of loans in the foreclosure process this past second quarter was 4.27 percent, down 12 basis points from the first quarter and 16 basis points lower than one year ago. The serious-delinquency rate — the percentage of loans that are 90 days or more past due or in the process of foreclosure — was 7.31 percent, a decrease of 13 basis points from the previous quarter, and a decrease of 54 basis points from first-quarter 2011.

The combined percentage of loans in foreclosure or at least one payment past due was 11.62 percent on a non-seasonally adjusted basis, a 29 basis-point increase from the previous quarter, but a 92 basis-point decrease year over year.

There are a few storylines in this data. Total and short-term delinquencies are up, a consequence of a slowdown in the economy and stubbornly high unemployment. Typically, short-term delinquencies are driven by the overall economy, which seems to be moving in the right direction, albeit at an excruciatingly slow pace.

Long-term delinquencies, foreclosure starts and foreclosure inventory are improving slowly, which is a positive sign for recovery, but we would like to see bigger steps forward. Defaulted loans made at the height of the boom are being worked through — and that is a good thing.

Foreclosure starts on Federal Housing Administration (FHA) loans were at 1.53 percent this past second quarter, up 57 basis points from the first quarter. This is the highest level ever recorded in our survey, but it is only slightly higher than the previous mark set in 2010. This increase likely was caused by one or more large servicers of FHA loans restarting foreclosure filings after completion of a Department of Justice review and the mortgage servicing settlement. If not for these events, the overall foreclosure starts percentage would have declined.

For much of the past year we have seen delinquencies improve, so it is significant that these numbers went in the wrong direction this past second quarter. It will be important to see if this represents a reversal in trends or is simply a hiccup. Mortgage performance through the end of this year will depend on the direction of employment.

To subscribe to MBA’s National Delinquency Survey, contact


David H. Stevens is president and CEO of the Mortgage Bankers Association. Previously, Stevens served as assistant secretary for housing at the U.S. Department of Housing and Urban Development and was appointed commissioner of the Federal Housing Administration by President Obama. Stevens was also president and chief operating officer of Long and Foster Companies, senior vice president at Freddie Mac, and executive vice president at Wells Fargo. Reach the MBA at (202) 577-2700.

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