Thursday, February 18, 2016

MBA: Mortgage Delinquency and Foreclosure Rates Decrease in Q4

by Bill McBride on 2/18/2016 10:57:00 AM

From the MBA: Mortgage Foreclosures and Delinquencies Continue to Drop

The delinquency rate for mortgage loans on one-to-four-unit residential properties decreased to a seasonally adjusted rate of 4.77 percent of all loans outstanding at the end of the fourth quarter of 2015. This was the lowest level since the third quarter of 2006. The delinquency rate decreased 22 basis points from the previous quarter, and 91 basis points from one year ago, according to the Mortgage Bankers Association's (MBA) National Delinquency Survey, released today at the association's National Mortgage Servicing Conference and Expo 2016 in Orlando, FL. 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 fourth quarter was 0.36 percent, a decrease of two basis points from the previous quarter, and down 10 basis points from one year ago. This foreclosure starts rate was at the lowest level since the second quarter of 2003.

The percentage of loans in the foreclosure process at the end of the third quarter was 1.77 percent, down 11 basis points from the third quarter and 50 basis points lower than one year ago. This was the lowest foreclosure inventory rate seen since the third quarter of 2007.

The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 3.44 percent, a decrease of 13 basis points from last quarter, and a decrease of 108 basis points from last year. This was the lowest serious delinquency rate since the third quarter of 2007.

Marina Walsh, MBA's Vice President of Industry Analysis, offered the following commentary on the survey:

"As the job market has improved and national home prices have rebounded, fewer borrowers were becoming seriously delinquent, while borrowers previously behind on their payments were in a better position to pursue alternative options to resolve delinquent loans.

"The overall delinquency rate fell to pre-recession levels and at 4.8 percent, was lower than the historical average of 5.4 percent for the time period 1979 to 2015. The rate at which new foreclosures were started decreased to 0.36 percent, the lowest rate since 2003 and only one-fourth of the record high level during the worst of the foreclosure crisis in the third quarter of 2009.
emphasis added
MBA Delinquency by PeriodClick on graph for larger image.

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

The percent of loans 30 and 60 days delinquent are at the lowest level since at least 2000.

The 90 day bucket peaked in Q1 2010, and is about 85% of the way back to normal.

The percent of loans in the foreclosure process also peaked in 2010 and and is about 85% of the way back to normal.

So it has taken 5 3/4 years to reduce the backlog of seriously delinquent and in-foreclosure loans by 85%, so a rough guess is that serious delinquencies and foreclosure inventory will be back to normal near the end of the current year.  Most other mortgage measures are already back to normal, but the lenders are still working through the backlog of bubble legacy loans.