Thursday, August 26, 2010

MBA Q2 2010: 14.42% of Mortgage Loans Delinquent or in Foreclosure

by Bill McBride on 8/26/2010 01:30:00 PM

The MBA reports that 14.42 percent of mortgage loans were either one payment delinquent or in the foreclosure process in Q2 2010 (seasonally adjusted). This is down slightly from the record 14.69 percent in Q1 2010.

From the MBA: Delinquencies and Foreclosure Starts Decrease in Latest MBA National Delinquency Survey

The delinquency rate for mortgage loans on one-to-four-unit residential properties dropped to a seasonally adjusted rate of 9.85 percent of all loans outstanding as of the end of the second quarter of 2010, a decrease of 21 basis points from the first quarter of 2010, and an increase of 61 basis points from one year ago, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey.
...
The percentage of loans in the foreclosure process at the end of the second quarter was 4.57 percent, a decrease of six basis points from the first quarter of 2010, but an increase of 27 basis points from one year ago.
Note: 9.85% (SA) and 4.57% equals 14.42%.

Much was made at the end of 2009 about the decline in the 30 day delinquency "bucket" (percent of loans between 30 and 60 days delinquent). Unfortunately the seasonally adjusted 30 day delinquency rate increased again in Q2 2010.

And much was made on the conference call this morning about the declines in the other "buckets", however the total percent of loans delinquent or in the foreclosure process declined only slightly in Q2 from Q1 - and is the second highest on record.

Note: there are some questions about the seasonal adjustment, especially for the 90 day bucket since we've never seen numbers this high before, but the adjustment for the 30 and 60 day periods are probably reasonable.

MBA Delinquency by Period Click on graph for larger image in new window.

Loans 30 days delinquent increased to 3.51%, and this is about the same levels as in Q4 2008 (slightly below the peak of 3.77% in Q1 2009).

Delinquent loans decreased in all other buckets - especially in the 90+ day bucket. MBA Chief Economist Jay Brinkmann suggested the decline in the 90+ day bucket was because of some successful modifications - since the lenders reported the loans as delinquent until the modification was made permanent.

MBA Delinquency rate by State The second graph shows the delinquency rate by state (red is seriously delinquent: 90+ days or in foreclosure, blue is delinquent less than 90 days).

Clearly Florida and Nevada have a large percentage of loans delinquent or in foreclosure. But the delinquency problem is widespread with 36 states and D.C. all having total delinquency rates above 10%.

When asked if he expected the slight improvements to continue, Brinkmann said "Improvements are more of a hope". He said the problem is jobs, and he is revising down his economic forecasts. He also the improvement in the 90+ day bucket might be because of modifications - and that might not continue.

With house prices falling - and growth slowing - the delinquency rate will probably increase later this year.