by Bill McBride on 2/22/2016 04:43:00 PM
Monday, February 22, 2016
This morning I posted some mortgage delinquency data from Black Knight (formerly LPS). The data showed an increase in delinquencies in January to 5.09%. Several people asked me if this is a leading indicator of a potential problem. The answer is no.
Here is what I wrote in 2012 when the delinquency rate was at 8%:
At the current rate of decline, the number of delinquent lonas will be back to "normal" in about three years (around 4.5% to 5% of loans are delinquent even in good times). However the number of loans in the foreclosure process hasn't change year-over-year - although that will probably change soon with the mortgage servicer settlement (around 0.5% of loans in foreclosure is "normal").The percent of loans in delinquency is now close to the normal range, although there are still an excessive number of seriously delinquent loans. As the delinquency rate approaches normal, it will not be unusual for the rate to increase in some months - no worries.
Note that the number of loans in the foreclosure process is still way above normal at 1.30% in January 2016; the lenders are still working through the backlog.