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Subprime & FHA Foreclosures Fall, Prime Inventory Rises

13.97% residential delinquency in Q2

Aug. 26, 2010

By staff

Residential loan delinquency improved, as did the overall foreclosure rate. But even as subprime foreclosures tumbled more than a hundred basis points, prime foreclosures increased. An increase in late payments on loans insured by the Federal Housing Administration was more than offset by a decline in the FHA foreclosure inventory. More than one-in-four Florida mortgages is delinquent or in foreclosure.

Including loans in foreclosure, second-quarter residential delinquency of at least 30 days was 13.97 on an unadjusted basis, the Mortgage Bankers Association reported today. Defaults improved from 14.01 percent reported for the first quarter but were still worse than 13.16 percent a year earlier.

On a seasonally adjusted basis, late payments fell to 14.42 percent from the first quarters14.69 percent.

MBA said the rate of new foreclosures started fell to 1.11 percent from 1.23 percent three months earlier and 1.36 percent a year earlier. The foreclosure inventory fell to 4.57 percent from 4.63 percent, though a year earlier the rate was lower at 4.30 percent.

"The fact that both the 90+ delinquency rate fell and the foreclosure start rate fell means that a significant number of these seriously delinquent loans have been successfully modified and reclassified as performing, current loans," MBA Chief Economist Jay Brinkmann said in a statement. "The disappointing news is that, after declining since the beginning of 2009, the rate of short-term delinquencies is going up and the increase in these short-term delinquencies may ultimately drive the foreclosure measures back up."

Brinkmann blamed rising unemployment insurance claims and re-defaults on modified loans for the deterioration in short-term delinquency. He predicted that a sustained improvement in delinquency will only occur when employment consistently rises.

The trade group said that its National Delinquency Survey covers around 44,508,533 mortgages that were outstanding at the end of June, including 32,932,946 prime mortgages, 4,480,574 subprime loans and 5,801,598 FHA-insured mortgages. Another 1,293,415 VA loans were reviewed.

Excluding the foreclosure inventory, Mississippi's 13.66 total delinquency was the highest of any state. Nevada's 13.23 was close behind, followed by 12.39 percent in Georgia, 11.41 percent in Michigan and Florida's 10.97 percent.

With a 2.93 percent new foreclosure filing rate, Nevada had the highest level of new filings. Florida's 2.07 percent followed, then 2.02 percent in Arizona -- the only other state above 2 percent.

The foreclosure inventory was highest in Florida: 14.04 percent. The only other state in the double digits was Nevada, where the foreclosure rate was 10.33 percent.

Looking at just prime mortgages, total adjusted delinquency was 10.59 percent, falling from the first quarter's 10.73 percent. The inventory of foreclosures, which is included in the overall figure, increased, however, to 3.49 percent from 3.41 percent.

On subprime mortgages, the total rate was 41.40 percent, better than 42.60 percent three months prior. Much of the improvement on subprime loans was driven by falling foreclosures; the subprime foreclosure inventory fell 101 basis points to 14.38 percent.

Total FHA delinquency was 16.91 percent, lower than the first quarter's 17.08 percent. A 14-basis-point increase in loans not in foreclosure was more than offset by a 31-basis-point decline in the foreclosure inventory.

The VA total delinquency rate improved to 10.29 percent from 10.59 percent.

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