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Subprime Foreclosures Improve Despite Rise in Overall Rate

30-day delinquency down 17 BPS between Q4 and Q1

May 16, 2012

By staff

Past-due payments on home loans have fallen for three consecutive quarters, though performance on mortgages to veterans deteriorated. But the rate of foreclosures was higher despite an improvement in subprime foreclosures.

Residential delinquency of at least 30 days was 11.79 percent as of the first quarter.

The rate fell from 11.96 percent in the fourth quarter. Delinquency has been lower each quarter since the second-quarter 2011, when the rate was 12.87 percent.

A year earlier, delinquency stood at 12.84 percent.

The Mortgage Bankers Association detailed the delinquency statistics Wednesday in its National Delinquency Survey Q1 2012. The survey reflected data from 120 lenders on 42,843,704 mortgages which the trade group said account for 88 percent of all first-lien U.S. residential loans.

On just prime mortgages, delinquency improved to 8.02 percent from the fourth-quarter's 8.11 percent.

Subprime delinquency eased to 34.44 percent from the prior period's 35.28 percent.

Delinquency on mortgages insured by the Federal Housing Administration was 15.83 percent, a 7-basis-point improvement from the end of last year.

However, delinquency deteriorated on loans that are guaranteed by the Department of Veterans Affairs, with the rate climbing to 9.03 percent from 8.92 percent.

The most-recent overall rate reflected a seasonally adjusted 30-day rate, excluding foreclosures, of 7.40 percent, better than 7.58 percent three months earlier and 8.32 percent a year earlier.

The highest delinquency rate, excluding foreclosures, was in Mississippi: 10.93 percent. Mississippi was the only state in the double digits.

After that was Georgia's 9.75 percent, Nevada's 9.56 percent and Maryland's 8.85 percent. Alabama rounded out the top-five states with an 8.81 percent rate.

"Mortgage delinquencies normally fall during the first quarter of the year, but the declines we saw were even greater than the normal seasonal adjustments would predict, so delinquencies are clearly continuing to improve," MBA Vice President of Research and Economics Michael Fratantoni said in an accompanying statement.

Fratantoni noted that only four states -- Maryland, Delaware, New Jersey and Washington -- saw an increase in 90-day delinquency, indicating widespread improvement in serious delinquency.

Also included in the first-quarter figure was an unadjusted foreclosure inventory rate of 4.39 percent, inching up from 4.38 percent at the end of 2011.

MBA's Fratantoni explained that much of the problem lies in judicial foreclosure states, where the rate was 6.9 percent versus just 2.8 percent in non-judicial states.

"As the foreclosure starts rate is essentially the same in both groups of states, that difference is due entirely to the systems some states have in place that effectively block timely resolution of non-performing loans and is not an indicator of the fundamental health of the housing market or the economy," he said. "In fact, hard-hit markets like Arizona that have moved through their foreclosure backlog quickly are seeing home price gains this spring."

Fratantoni noted that 60 percent of loans that were at least three months past due or in foreclosure were originated between 2005 and 2007.

The overall U.S. foreclosure inventory was 4.52 percent in the same period last year.

The foreclosure rate on only prime loans climbed 6 basis points from the fourth-quarter to 3.34 percent.

FHA foreclosures jumped 29 BPS to 3.83 percent, while the VA rate was up 9 BPS to 2.46 percent.

But the subprime foreclosure rate fell 40 BPS to 14.05 percent.

Florida accounted for 24.1 percent of all U.S. foreclosures in process. California represented 9.8 percent, followed by 6.6 percent for Illinois, 6.5 percent for New York and 5.5 percent for New Jersey.

Together, the five states accounted for 52 percent of all foreclosures even though less than a third of all loan serviced are located in those states.

Foreclosures were started on 0.96 percent of all U.S. mortgages during the first-three months of 2012 -- the lowest rate since 2007.

The latest rate was an improvement from 0.99 percent in the prior period. In the first quarter of last year, 1.08 percent of all mortgages entered the foreclosure process.

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