Thursday, February 20, 2014

MBA: Mortgage "Delinquency and Foreclosure Rates Decline to Lowest Level in Six Years" in Q4

by Bill McBride on 2/20/2014 10:38:00 AM

From the MBA: Delinquency and Foreclosure Rates Decline to Lowest Level in Six Years

The delinquency rate for mortgage loans on one-to-four-unit residential properties decreased to a seasonally adjusted rate of 6.39 percent of all loans outstanding at the end of the fourth quarter of 2013, the lowest level since the first quarter of 2008. The delinquency rate decreased two basis points from the previous quarter, and 70 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 in the foreclosure process at the end of the fourth quarter was 2.86 percent, down 22 basis points from the third quarter and 88 basis points lower than one year ago. This was the lowest foreclosure inventory rate seen since 2008.
“We continue to see substantial improvement in both delinquency and foreclosure rates, with most measures now back to pre-crisis levels,” said Michael Fratantoni, MBA’s Chief Economist and Senior Vice President of Research and Industry Technology. “The delinquency rate, at 6.39 percent, is more than 3 percentage points lower than its peak of over 10 percent in 2010 and is edging closer to the historical average of around 5 percent. The percentage of loans in foreclosure has fallen for the seventh consecutive quarter, decreasing to 2.86 percent, the lowest level in six years. The percentage of new foreclosures started, at 0.54 percent, is the lowest in eight years and is back within its typical historical range.

“There was broad improvement in foreclosure rates in the fourth quarter, with 49 states and the District of Columbia recording a decrease. Florida still leads the nation in the percentage of loans in foreclosure, but that percentage has fallen to 8.56 percent from a peak of 14.5 percent. New Jersey and New York had the next two highest rates but both states did see a drop from the previous quarter. States with judicial foreclosure systems still account for most of the loans in foreclosure. Of the 17 states that had a higher foreclosure inventory rate than the national average, 15 were judicial states. While the percentage of loans in foreclosure dropped in both judicial and nonjudicial states, the average rate for judicial states was 4.92 percent compared to the average rate of 1.52 percent for nonjudicial states. That being said, for judicial states this was still a significant improvement from the rate of 6.88 percent recorded in 2012."
emphasis added
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 2.89% from 2.79% in Q3. This is close to the long term average.

Delinquent loans in the 60 day bucket decreased to 1.06% in Q4, from 1.07% in Q3. This is still slightly elevated.

The 90 day bucket decreased to 2.45% from 2.56%. 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 2.86% from 3.08% and is now at the lowest level since 2008.

Most of the poor performing loans were originated in 2007 or earlier, from the MBA's Fratantoni:
“Loan cohorts from 2009 and earlier continue to make up more than 90 percent of seriously delinquent loans.  Loans originated in 2007 and earlier accounted for 75 percent of the seriously delinquent loans, while loans originated in 2008 and 2009 accounted for another 16 percent."
This survey has shown steady improvement in delinquency and foreclosure rates, but it will take a few more years to work through the backlog - especially in judicial foreclosure states.