Mortgage delinquency slowed during the third quarter and foreclosures remained flat, according to the National Delinquency Survey released Tuesday by the Mortgage Bankers Association of America (MBA). The MBA is also debuting a look at prime conventional delinquencies alone.
For one-to-four unit residential properties, the delinquency rate was 4.66% during the third quarter, the MBA found. That seasonally adjusted rate is an 11 basis points (bps) decrease from second quarter, and a drop of 17 bps from third quarter 2001.
The most significant drop in overall loan delinquency came from the 30-days past-due variety, which went from 3.20% in the second quarter to 3.06% in the third quarter. The 60-day delinquency rate remained unchanged at 0.79%, but 90-day delinquencies increased slightly from 0.78% in the second quarter to 0.82% in the third quarter.
Doug Duncan, MBA senior vice president and chief economist, said he believes that delinquencies have peaked and the housing market will continue to contribute to the recovering economy.
"We believe going forward there will be fewer households facing the harsh economic reality of unemployment that helped to drive up delinquencies and foreclosures in the first two quarters of 2002," he said. "Certainly, that could change with any unforeseen circumstances, but all indicators are pointing toward a growing economy and ultimately an improving job market."
Breaking it down from a different angle, conventional loan delinquencies also decreased -- 3.04% during the third quarter from 3.10% in the second quarter.
The delinquency rate on Federal Home Administration (FHA)-insured mortgages slightly dropped from 11.81% during the second quarter to 11.62% during the third quarter.
The growth of the subprime market has increased the number of subprime loans included in the survey’s conventional loan category, the MBA said. Of the more than 34 million loans included in this year's third quarter survey, the percentage of subprime loans has increased to 3.6% from 1.8% over the past five years. However, the FHA percentage of the total has fallen from 20.8% to 15.6%, and the VA percentage has fallen from 9.4% to 5.6%.
Because of the increase in subprime loans included in the survey, the MBA has begun including a separate snapshot for the prime conventional loan delinquency rate: 2.54% in the third quarter from 2.64% during the second quarter. It also fell 32 bps from last year.
"The subprime breakout we are debuting today, while a very important look at the marketplace, is a snapshot, as it represents less than half the subprime market and includes some specialized firms," Duncan said. "The separation of the conventional market provides clarity to prime activity. We will, over the next few quarters, add more subprime reporting companies to provide our members with a more complete view of delinquencies and foreclosures in the subprime market."
The delinquency rate does not include loans in foreclosure, a separate category. The total percentage of loans in foreclosure was 1.15% in the third quarter, up slightly from 1.13% in the second quarter. The percentage of loans that entered the foreclosure process during the third quarter remained almost unchanged from 0.38% in the second quarter to 0.37% in the third quarter.
The percentage of prime loans in foreclosure also held steady at 0.51% in the second and third quarters, but it increased 6 bps from last year.
The prime conventional data contain about 26 million loans. The subprime data represents information from 13 companies, including 1.2 million loans and are not considered representative of the total subprime market, the MBA said.
The MBA also reported a correction to second quarter data: the number of loans reported to be in foreclosure was too high, mainly FHA and VA loans. This was due to a changeover in the servicing system used by one of the larger reporting companies, the MBA said. The second quarter figures presented for comparison in the third quarter report have been adjusted to reflect the corrections.