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Delinquencies Accelerate

FHA loans see biggest jump

September 12, 2002


The share of Americans paying their home mortgages late increased at a faster pace during the second quarter. FHA loans led the jump in delinquency.

The Mortgage Bankers Association of America (MBA) reported that the percentage of borrowers past due thirty days or more on 1-4 unit residential properties was 4.77%, up 0.12% -- or 12 basis points (BPS) -- from the first quarter. The jump compares to a 0.02% increase from the end of last year to the first quarter.

A year ago, MBA said 30+ day delinquency was 4.63%.

The data, released this week in MBA's second quarter National Delinquency Survey, indicate that broken down by degree of delinquency, 3.2% of mortgage borrowers were 30-days past due, while 0.79% were sixty days past due and 0.78% were 90 days past due. The biggest jump was in the 90-day category, which increased seven BPS from last quarter.

source: Mortgage Bankers Association

"The increase in delinquencies is due mainly to the increase in unemployment that occurred from the first quarter to the second quarter of this year," explained MBA's chief economist, Doug Duncan. "In the first quarter, unemployment averaged 5.6 percent, but increased to an average of 5.9 percent in the second quarter. One year ago, in the second quarter of 2001, unemployment averaged 4.5 percent."

source: Mortgage Bankers Association
According to the survey, which MBA says currently covers more than 33 million loans reported by about 130 lenders, FHA loans are seeing a bigger increase in delinquency than conventional loans. While the delinquency rate for conventional mortgages was up only 6 BPS to 3.10%, FHA delinquency jumped a whopping 0.58% to 11.81%. VA loan delinquency was 8%, up 19 BPS.

In an effort to reduce delinquency on FHA loans, the Department of Housing and Urban Development recently announced it will allow fewer defaults and claims on loans before levying sanctions against FHA lenders.

Delinquency on fixed rate loans rose 11 BPS to 4.03%, compared to adjustable rate loans -- which jumped 34 BPS to 6.06%.

By region, the Northeast saw the biggest increase in delinquency, rising 20 BPS to 4.64%. The delinquency rate fell six BPS to 5.73% in the South -- the only region to improve. At the same time, some states in or near the South saw the highest delinquency levels in the country. Mississippi's delinquency rate was 7.89%, while Louisiana was 7.04% and Tennessee was 6.45%. Texas and Georgia had respective delinquency rates of 6.21% and 5.99%.

MBA said mortgage loan delinquencies tend to lag changes in economic activity, and that the current economic slowdown began in 2000.

Foreclosure was started on 0.40% of loans, MBA said, up from 0.37% the first quarter. Loans in the process of foreclosure were 1.23% at the end of the quarter, up 13 BPS from the prior quarter.

As with delinquency, FHA loans represented a greater proportion of the increase of loans in the process of foreclosure, jumping 47 BPS to 2.79%. Conventional loans rose 0.06% to 0.87%, and VA loans increased 31 BPS to 1.72%.

Among the states with the highest percentage of borrowers in the foreclosure process were Indiana with 2.22%, Ohio with 2.15%, Mississippi with 2.12%, South Carolina with 2.10% and Utah with 2.03 percent.

source: Mortgage Bankers Association

MBA's Duncan said the trade organization currently expects delinquencies to remain near their current level for the next few quarters.

Sam Garcia has been in mortgage lending since 1980, and is publisher of MortgageDaily.com. He also owns and operates CloseNow.com, a real estate portal site.

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