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U.S. Delinquency Improves as FHA Performance Tanks

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Mortgage Daily

                                                 February 16, 2012

Mortgage bankers reported that delinquency and foreclosures were lower during the final three months of last year. Even subprime performance improved. But the picture gets much darker when zeroing in on government-insured mortgages. The latest data reflected a two-month delinquency rate that conflicts with statistics reported earlier this week.

Residential loan delinquency of at least 30 days, including foreclosures, was 11.96 percent on a seasonally adjusted basis during the fourth-quarter 2011.

The Mortgage Bankers Association, which released the data Thursday, reported that third-quarter delinquency was 12.42 percent. A year earlier, the rate was a revised 12.89 percent.

The trade group based its findings on a survey of 120 lenders that serviced 42,892,629 loans. The group reportedly services 88 percent of all first-lien residential loans.

MBA Chief Economist Jay Brinkmann attributed the decline in past-due payments to improvements in the job market, a stronger economy and the runoff of pre-2008 vintages.

On prime mortgages, the Washington, D.C.-based association reported that seasonally adjusted delinquency, including foreclosures, was 8.11 percent, tumbling 45 BPS over the prior three months and 104 BPS below the rate as of the end of 2010.

Subprime delinquency was a whopping 35.28 percent, though that was an improvement from 37.62 percent three months earlier and 37.50 percent 12 months earlier.

On Federal Housing Administration loans, the 30-day rate leapt to 15.90 percent from 15.36 percent as of Sept. 30, 2011. FHA delinquency was also worse than 15.57 percent as of Dec. 31, 2010.

Without any seasonal adjustments, overall delinquency fell to 12.53 percent from 12.63 percent and was 13.56 percent in the fourth-quarter 2010.

Lender Processing Services Inc. previously reported that the 30-day rate declined 1 basis point from Sept. 30, 2011, to finish last year at 12.26 percent. LPS’ rate was 12.98 percent at the end of 2010.

MBA’s seasonally adjusted data reflected a 30-day rate, excluding foreclosures, of 7.58 percent, lower than 7.99 percent three months earlier and a revised 8.25 percent a year earlier.

Delinquency, excluding foreclosures, was 13.13 percent in Mississippi, worse than any other state. Not far behind was Georgia’s 11.33 percent rate.

At 3.30 percent, North Dakota had the lowest rate.

The trade group’s 60-day data conflicts with another report this week from TransUnion. While MBA’s unadjusted 60-day rate of 4.72 percent was 11 BPS lower than the prior quarter, TransUnion said its 6.01 percent rate was up 13 BPS from the third quarter.

MBA said that the foreclosure rate, which is not adjusted for seasonal variances, fell to 4.38 percent from 4.43 percent as of Sept. 30, 2011. A year prior, the inventory of foreclosed loans stood at a revised 4.64 percent.

Florida, with a 14.27 percent fourth-quarter foreclosure rate, was the only state with a double-digit rate. Foreclosures are processed through the Sunshine State’s court system, and judges have frequently been obstructing the disposition of delinquent loans by servicers. Still, Florida’s foreclosure rate improved from the prior quarter’s 14.49 percent.

At the other end of the spectrum was Wyoming’s 1.03 percent foreclosure inventory rate.

“States with non-judicial foreclosure systems are seeing the backlog of foreclosures clear more rapidly and are down to an average rate of 2.8 percent,” Brinkmann explained. “In contrast, the percentage of loans in foreclosure in the judicial system states has hit an all-time high of 6.8 percent, almost two and a half times higher than [the] rate for non-judicial states.”

Foreclosures were started on 0.99 percent of U.S. loans during the final three months of last year, lower than 1.08 percent in the third quarter and 1.27 percent in the same period during 2010.

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