Slightly more mortgage loans entered into foreclosure in the first quarter, but delinquencies decreased for all loan types and will likely continue to do so throughout the year as the labor market continues expanding, the nation's primary trade association said.
In its first quarter National Delinquency Survey, the Mortgage Bankers Association of America (MBA) said that the seasonally adjusted delinquency rate on one-to-four unit residential mortgage loans in the first quarter was 4.33% -- 16 basis points (BPS) below the rate in the fourth quarter of 2003 and a whopping 52 BPS lower than a year ago.
The primary driver of the overall lower delinquency rate was the drop in percentage of loans past due 30 to 59 days, Duncan said in the group's conference call. The seasonally adjusted short-term delinquency rate fell 13 BPS to 2.76%.
Economically, "the single most important determinant" of the lower delinquency levels is the significant boost the employment market has experienced in the past months, MBA's chief economist Doug Duncan said in a conference call.
"An expectation of strong job growth for the rest of the year and continued strength in the housing market bodes well for lower delinquency and foreclosure rates in the upcoming quarters," he said in a statement.
The Federal Housing Administration loan delinquency rate remained higher than subprime delinquency for the second consecutive quarter, according to Duncan. The seasonally adjusted FHA delinquency rate was 11.68%, plunging 55 BPS during the first quarter, compared with the subprime rate of 11.19% that declined 40 BPS. The rate for Department of Veterans' Affairs (VA) loans sunk 62 BPS to 7.37% and prime loans decreased to 2.26%.
The percentage of loans in the foreclosure process at the first quarter's end slipped 2 BPS to 1.27% on a seasonally adjusted basis, the Washington, D.C.-based group said. Out of all loan types, the subprime loan foreclosure inventory percentage decreased by the most -- it fell 48 BPS to 5.05%. FHA loan foreclosure inventory dropped to 2.78%, VA loans nudged down to 1.53% and prime loans edged down to 0.53%.
The seasonally adjusted percentage of new foreclosures, or those that entered the foreclosure process during the first quarter, edged up 1 BPS to 0.46%, according to MBA. Out of all loan types, the FHA new foreclosure percentage was the only one that increased -- up 2 BPS to 0.93% -- but the higher percentage (1.99%) still belonged to subprime loans.
The data was derived from a review of 37.5 million first-lien mortgages, which is about 350,000 more loans than the fourth quarter, Duncan said. The subprime sample of the survey consisted of 3.7 million loans, about 600,000 more than the previous quarter.