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Mixed Delinquency Data

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Seasonally adjusted delinquency was higher on residential loans, as were late payments on subprime loans and Veterans Affair’s mortgages. But overall defaults declined more than a hundred basis points when no seasonal adjustments are made. States with judicial foreclosure requirements appear to be the same states that will suffer the longest with bloated inventories.

As of the end of the first quarter, 12.31 percent of U.S. residential loans were delinquent at least 30 days or in foreclosure.

That was one of the findings from the Mortgage Bankers Association’s National Delinquency Survey. The report was released Thursday and reflected data from 43.7 million loans secured by one- to four-unit residential properties.

MBA previously reported a fourth-quarter 2010 rate of 13.56 percent, while delinquency was 14.01 percent as of March 31, 2010.

The latest numbers reflected a 30-day delinquency rate of 7.79 percent excluding foreclosures, falling from a revised 8.96 percent three months earlier.

MBA Chief Economist Jay Brinkmann said that most of the numbers point to continued improvement in the mortgage market.

“Of particular importance is that the drop in the percentage of loans 90 days or more past due was driven by improving numbers for loans originated between 2005 and 2007,” Brinkmann explained in the report. “These are the loans that drove the mortgage market collapse and now represent about 31 percent of loans outstanding but 65 percent of the loans seriously delinquent. Given that loans originated during this period are now past the point where loans normally default, and that loans originated since then generally have better credit quality, mortgage performance should continue to improve.”

But the Washington, D.C.-based trade group said that after adjusting for seasonality, overall delinquency excluding foreclosures was up 7 basis points to 8.32 percent.

The 4.52 percent foreclosure rate, on an unadjusted basis, was better than the prior period when the rate was a revised 4.64 percent.

Brinkmann said that market recovery by state depends on individual state laws. For instance, Florida, New Jersey and Illinois had the biggest increases in the number of loans in foreclosure during the first quarter. Each of these states has judicial foreclosure processes that extend the amount of time it takes to complete a foreclosure while increasing the foreclosure inventory, all else being equal.

But the states with the largest decreases in loans in foreclosure — California, Arizona and Michigan — don’t require foreclosure to go through the court system.

“The impact, however, of individual state judicial foreclosure laws in keeping the number of loans in foreclosure elevated in some states, and thus keeping high the potential overhang of housing inventory in those states, is not a national issue, even though it increases the national foreclosure numbers,” Brinkmann stated.

Delinquency on U.S. prime mortgages fell to 9.02 percent from 9.15 percent three months earlier.

Subprime delinquency, meanwhile, jumped to 38.70 percent from 37.50 percent.

On loans insured by the Federal Housing Administration, delinquency improved to 15.38 percent from the fourth quarter’s 15.57 percent. Delinquency deteriorated to 9.32 percent on loans guaranteed by the Department of Veterans Affairs from 9.02 percent.

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