Thursday, May 09, 2013

MBA: Mortgage Delinquency Rates increase in Q1, Foreclosure Inventory Down Sharply

by Bill McBride on 5/09/2013 11:17:00 AM

From the MBA: Mortgage Delinquency Rates Increase, But Foreclosure Inventory Rate Down Sharply

The delinquency rate for mortgage loans on one-to-four-unit residential properties increased to a seasonally adjusted rate of 7.25 percent of all loans outstanding at the end of the first quarter of 2013, an increase of 16 basis points from the previous quarter, but down 15 basis points from one year ago, according to the Mortgage Bankers Association’s (MBA) National Delinquency 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 on which foreclosure actions were started during the first quarter was unchanged at 0.70 percent, the lowest level since the second quarter of 2007, and was down 26 basis points from one year ago. The percentage of loans in the foreclosure process at the end of the first quarter was 3.55 percent, the lowest level since 2008, down 19 basis points from the fourth quarter and 84 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 6.39 percent, a decrease of 39 basis points from last quarter, and a decrease of 105 basis points from the first quarter of last year.

“On a seasonally adjusted basis, the overall delinquency rate increased this quarter, driven by a slight increase in the 30-day delinquency rate. Normal seasonal patterns are beginning to re-emerge, but as has been true post-crisis, it is still difficult to parse typical seasonal swings from true changes in performance. It is also important to note the decline relative to last year at this time. Regardless, we remain in a period of slow and uneven economic and job growth in the US and there are still many borrowers without stable, full time employment, or that are still unemployed. On a seasonally adjusted basis the largest increases in delinquency were in the subprime fixed and ARM categories, typically sensitive to income and payment shocks, and likely even more so in the current economic environment,” said Michael Fratantoni, MBA’s VP of Research and Economics.
MBA Delinquency by PeriodClick on graph for larger image.

This graph shows the percent of loans delinquent by days past due.

Loans 30 days delinquent increased to 3.21% from 3.04% in Q4. This is just above the long term average.  This is seasonally adjusted, and as Fratantoni noted the seasonal adjustment is difficult right now.  Not Seasonally Adjusted basis (NSA) the 30 day delinquency rate declined in Q1 to 2.86% from 3.21%.

Delinquent loans in the 60 day bucket increased slightly to 1.17% in Q1, from 1.16% in Q4.  (NSA was also down significantly for the 60 day bucket).

The 90 day bucket decreased slightly to 2.88% from 2.89%. This is still way above normal (around 0.8% would be normal according to the MBA).

The percent of loans in the foreclosure process decreased to 3.55% from 4.74% and is now at the lowest level since 2008.

MBA In-foreclosure by stateThis graph is from the MBA and shows the percent of loans in the foreclosure process by state. Posted with permission.

The top states are Florida (11.43% in foreclosure down from 12.15% in Q4), New Jersey (9.00% up from 8.85%), New York (6.18% down from 6.34%), and Illinois (5.89% down from 6.33%).  Nevada is the only non-judicial state in the top 10, and this is partially due to state laws that slow foreclosures.

California (1.76% down from 2.06%) and Arizona (1.77% down from 2.02%) are now well below the national average by every measure.

Judicial vs. non-Judicial statesFor judicial foreclosure states, it appears foreclosure inventory peaked in Q2 2012 (foreclosure inventory is the number of mortgages in the foreclosure process).  Foreclosure inventory in the judicial states has declined for three consecutive quarters.  This was three years after the peak in foreclosure inventories for non-judicial states.

As Fratantoni noted, delinquency rates typically decline (NSA) from the end of Q4 to the end of Q1, and that happened this year. The seasonal adjustment might be a little off (so NSA short term delinquency increased slightly), and I expect the delinquency and foreclosure rates to continue to decline.