by Calculated Risk on 1/29/2014 04:38:00 PM

Freddie Mac reported that the Single-Family serious delinquency rate declined in December to 2.39% from 2.43% in November. Freddie's rate is down from 3.25% in December 2012, and this is the lowest level since February 2009. Freddie's serious delinquency rate peaked in February 2010 at 4.20%.

These are mortgage loans that are "three monthly payments or more past due or in foreclosure". 

Note: Fannie Mae will report their Single-Family Serious Delinquency rate for December on Friday.

Click on graph for larger image

Although this indicates progress, the "normal" serious delinquency rate is under 1%. 

The serious delinquency rate has fallen from 0.86 percentage points over the last year - and at that rate of improvement, the serious delinquency rate will not be below 1% until mid-to-late 2015. 

Very few seriously delinquent loans cure with the owner making up back payments - most of the reduction in the serious delinquency rate is from foreclosures, short sales, and modifications. 

So even though distressed sales are declining, I expect an above normal level of distressed sales for another 2+ years (mostly in judicial foreclosure states).