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Early-Stage Delinquency Deteriorates as Foreclosures Fall

Mortgage News

An improvement in the foreclosure rate wasn’t enough to overcome a more than 30-basis-point increase in new defaults. The deterioration in government-insured mortgages was twice as bad as it was for all loans.

In its quarterly delinquency survey, the Mortgage Bankers Association said delinquency of at least 30 days, including foreclosures, was 12.54 percent, worsening from the first quarter’s 12.31 percent.

Compared to the 13.97 percent rate in the second-quarter 2010, performance has improved.

MBA surveyed around 120 lenders for the latest report, which reflected 43.9 million loans representing 88 percent of all first liens.

Included in the latest numbers was an 8.11 percent, non-seasonally adjusted, delinquency rate excluding foreclosures. That was a 32-basis-point deterioration from the first quarter.

“It is clear that the downward trend we saw through most of 2010 has stopped,” the trade group’s chief economist, Jay Brinkmann, said in the report. “Mortgage delinquencies are no longer improving and are now showing some signs of worsening.”

But foreclosures retreated to 4.43 percent from the prior period’s 4.52 percent.

Brinkmann said that California’s 3.6 percent foreclosure rate was much less than in states like Florida, where the rate was 14.4 percent, because it doesn’t have a judicial foreclosure system. He pointed to Maryland as a “prime example” of states “burdened with elevated 90+ delinquent rates, likely due to specific government actions intended to slow foreclosure initiations in recent quarters.”

Foreclosures were started on 0.96 percent of mortgages, 12 BPS better than the first quarter. Brinkmann said it was the lowest level of starts since the fourth-quarter 2007.

Delinquency on loans insured by the Federal Housing Administration, including foreclosures, climbed to 15.86 percent from 15.38 percent.

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