Thursday, August 07, 2014

Comments on Q2 National Delinquency Survey: About 2 Years until Normal Levels

by Calculated Risk on 8/07/2014 07:07:00 PM

Earlier today the MBA released their Q2 National Delinquency Survey: Delinquency and Foreclosure Rates Decrease in Second Quarter

One of the key questions for housing is when will delinquencies and foreclosures be back to normal?

As Joel Kan, MBA’s Director of Economic Forecasting, said this morning:

“Some states hardest hit by the crisis, for example California and Arizona, now have foreclosure inventory rates that are both back to pre-crisis levels and less than half the current national rate. On the other hand, despite declines last quarter, states with slower-moving judicial foreclosure regimes, like New Jersey, Florida and New York, have foreclosure inventory rates two to three times the national average."
So the answer about when delinquencies and foreclosures will be back to normal depends on the state and foreclosure process.  Some states have already recovered and others are lagging behind.

A key point to remember is that most of the problem loans were originated in 2007 or earlier (a long time ago), and the lenders are just working through the backlog.  From the MBA:
... 75 percent of seriously delinquent loans were originated in 2007 and earlier. Loans with vintages started in 2011 and later only accounted for six percent of all seriously delinquent loans.
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 days and 60 days delinquent are back to normal levels.

The 90 day bucket peaked in Q1 2010, and is about two-thirds of the way back to normal.

The percent of loans in the foreclosure process also peaked in 2010 and is close to two-thirds of the way back to normal.

So it has taken about 4 years to reduce the backlog by two-thirds, so a rough guess is that delinquencies and foreclosures will be back to normal in about 2 years.