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Stories about mortgage servicers, delinquency and f o r e c l o s u r e s. Coverage of servicing lawsuits and loan servicing technology.

New FHA Foreclosures Jump

9.24% Q2 delinquency

August 20, 2009

By staff

The share of U.S. mortgages that were either delinquent or in foreclosure surpassed 13 percent and reached an all-time record, according to a new trade group report. Foreclosures on loans insured by the Federal Housing Administration "saw a major jump," but new subprime foreclosures fell as VA performance improved.

The Mortgage Bankers Association reported today that seasonally adjusted delinquency of at least 30 days, excluding foreclosures, was a record 9.24 percent in the second quarter. The findings were based on 44.7 million outstanding residential mortgages.

Delinquency rose from 9.12 percent in the first quarter and 6.41 percent in the second-quarter 2008.

Prime delinquency increased from the first quarter's 6.06 percent to 6.41 percent, while subprime late payments crept up to 25.35 percent in the second quarter from 24.95 percent. FHA delinquency, meanwhile, rose to 14.42 percent from 13.84 percent, but VA late payments eased to 8.06 percent from 8.21 percent.

Delinquency was highest in Mississippi: 13.04 percent. The second-highest rate was Nevada's 12.14 percent, then Michigan's 11.57 percent, Indiana's 11.14 percent and Georgia's 10.94 percent.

Foreclosures in process ended June at 4.30 percent, jumping from 3.85 percent as of March 31. Foreclosures were up 155 basis points from 12 months earlier.

The rate of prime mortgage foreclosures in process climbed to 3.00 percent from 2.49 percent, while the subprime rate rose to 15.05 percent from 14.34 percent. The FHA foreclosure rate increased to 2.98 percent from 2.76 percent, and VA foreclosures rose to 2.07 percent from 1.93 percent.

With a rate 11.96 percent, Florida had the highest level of foreclosures in process. A distant second was Nevada's 9.13 percent. No. 3 was Arizona, at 6.17 percent, followed by 5.77 percent in California and 5.03 percent in New Jersey.

The trade group said foreclosures were started on 1.36 percent of U.S. mortgages, better than 1.37 percent in the first quarter. But new foreclosure filings jumped 17 BPS from a year earlier.

Prime mortgages accounted for one-in-three foreclosure starts, increasing from one-in-five a year ago. The rate of foreclosures started on prime loans was 1.01 percent, worsening from 0.94 percent in the first quarter. FHA foreclosure starts were also higher, rising 5 BPS to 1.15 percent.

But subprime foreclosure starts fell to 4.13 percent from 4.65 percent, and VA foreclosure starts improved 4 BPS to 0.68 percent.

The highest rate of new foreclosure filings was in Nevada at 3.70 percent, followed by Florida' 2.64 and Arizona's 2.51 percent. No. 4 was California, at 2.00 percent, and No. 5 was Rhode Island, at 1.47 percent

MBA Chief Economist Jay Brinkmann noted "a major drop" in foreclosures on subprime adjustable-rate mortgages. He added that foreclosure starts continued to be disproportionately high in California, Florida, Arizona and Nevada. The four states accounted for 44 percent of all new foreclosure filings.

"We also saw a major jump in FHA foreclosures," Brinkmann said. "The percentage of loans with foreclosures started, the percentage of loans in foreclosure and the percentage of loans 90 days or more past due are all records for FHA."

Brinkmann explained that the FHA foreclosure start rate had remained low as a result of a large increase in FHA loans outstanding.

The economist predicted no meaningful reduction in delinquency rates or foreclosure rates as long as employment activity remains weak. He did note, however, that loan modification programs have helped prevent an even bigger increase the foreclosure rate.

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