Mortgage bankers reported higher delinquencies and lower foreclosures in the third quarter. But the figures, which don't yet fully account for the impact from the recent storms, may get worse.
As of the end of the third quarter, the seasonally-adjusted delinquency rate for single-family loans rose to 4.44% from the second quarter's 4.34%, according to the Mortgage Bankers Association's National Delinquency Survey announced today. The rate, however, is 10 basis points better than the third quarter a year ago.
The survey covered approximately 40.7 million loans, of which 30.7 million were prime, 5.3 million subprime and the rest government loans.
The increase during the third quarter reflected the impact of Hurricane Katrina -- the delinquency rate for Louisiana surged to 24.63% from 6.67% and for Mississippi soared to 17.44% from 8.53% due to destruction and dislocation, according to the announcement. MBA noted that when it removed storm effects from its calculation, delinquencies on all types of loans decreased a total of 13 BPS during the third quarter.
"Hurricane Katrina was the largest natural disaster this country has faced in the last few generations, and obviously has had a major effect on the local housing markets in Louisiana and Mississippi," MBA chief economist Doug Duncan said in a statement. "In addition, we have the impacts of Rita in Texas and Louisiana and Wilma in Florida to consider."
The percentage of loans in the foreclosure process was reported at 0.97%, dropping 3 BPS and 19 BPS on a quarterly and annual basis, respectively. Foreclosure starts in the third quarter of 0.41%, ticked up 2 BPS from the second quarter and 1 BPS from a year ago. However, the foreclosure percentages do not yet reflect the impact of Katrina.
The natural disaster effects, higher energy prices and rate resets on some mortgages will likely result in higher delinquency rates and somewhat higher foreclosure rates for at least the next few quarters, the trade group indicated.
"The percentage of homeowners making their mortgage payments on time is nearly 96 percent, although it is likely that rising short-term rates will impact some borrowers with adjustable rates," Duncan added. "In addition, natural gas prices have roughly doubled from where they were this time last year. That and the higher costs of home heating oil are driving up home heating bills this winter and will likely strain the ability of some borrowers to make their mortgage payments."
While the seasonally-adjusted delinquency rate rose from the second quarter for prime, subprime, FHA and VA loans, the largest increase, 38 BPS to 12.75%, was seen in FHA loans, which also had the highest yearly increase at 51 BPS. Compared to a year ago, the rates rose for all loans except VA, which declined 17 BPS to 7.12%, MBA said.
With prime loans, the reported fixed-rate mortgage delinquency was 2.11%, while prime ARM loans were 2.30%.
Subprime fixed-rate loans had a delinquency rate of 8.79% -- down on a quarterly and annual basis. Meanwhile, the 10.55% rate for subprime ARMs was respectively 51 BPS and 15 PBS worse, according to the announcement.