|A decline in new foreclosure filings is expected to be only temporary, and residential loan performance is expected to worsen.
Residential delinquency of at least 30 days ended September at 6.99 percent, the Mortgage Bankers Association announced today in its National Delinquency Survey. Late payments increased 58 basis points from June 30 and were 140 BPS higher than on Sept. 30, 2007.
MBA noted that the elevated 30-day delinquency rate is still lower, however, than in the 2001 recession.
Seasonally adjusted delinquency for prime loans increased 41 BPS from the second quarter to 4.34 percent, while subprime delinquency rose 136 BPS to 20.03 percent and the FHA rate was up 29 BPS to 12.92 percent.
The seasonally adjusted total delinquency rate was the highest on record, MBA reported. The spike was driven by a 45 BPS surge in 90-day late payments -- with much of the deteriorating activity concentrated in California and Florida. The increase in 90-day lates was also the biggest on record.
Delinquency excluded loans in the process of foreclosure.
MBA said 575,204 loans started the foreclosure process during the quarter at a rate of 1.07 percent, 1 basis point better than the second quarter, when 579,810 foreclosures were filed, but 29 BPS worse that the same period in 2007, when there were 535,438 new filings.
The three-quarter average rate of foreclosures started during 2008 was 1.08 percent.
The group estimates around 2.2 million foreclosures will be initiated during all of 2008.
The trade group's chief economist, Jay Brinkmann, explained that new foreclosure activity was impacted by "various moratoria on foreclosure filings and by mortgage companies holding loans in the 90+ day bucket during the modification and workout process."
California saw 92,711 foreclosures started during the third quarter, tumbling from 110,023 in the prior period. SB 1137 took effect in the Golden State during September and requires lenders to make contact with borrowers at least 30 days before filing a notice of default.
Foreclosures started in Florida were 90,322, up from 86,100 in the second quarter.
Brinkmann noted that even though 20 states showed declines in the rate of foreclosure starts from the second quarter, every state except Alaska showed an increase in 90-day delinquency. He said 90-day delinquency was only expected to increase 4 BPS versus the actual 45 BPS increase.
Loans in foreclosure were 2.97 percent at the end of the third quarter, increasing 22 BPS from three months earlier and 128 BPS higher than 12 months earlier. Prime foreclosures rose 16 BPS to 1.58 percent and subprime foreclosures were up 74 BPS to 12.55 percent.
"Prime and subprime ARMs continue to have the highest share of foreclosures and California and Florida have about 54 percent and 41 percent of the prime and subprime ARM foreclosure starts respectively," Brinkmann stated. "Until those two markets turn around, they will continue to drive the national numbers."
U.S. employers cut 533,000 jobs during November, and Brinkmann speculated that foreclosures due to job losses will be exacerbated in the current recession by the weak housing market.
"The effects of job losses and general economic deterioration make the 2009 outlook worse, particularly if mortgage problems become more widespread," Brinkmann said.