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Seasonal Adjustments Drive Delinquency Down

Mortgage News

After making adjustments for seasonal variations, late payments on residential loans fell. But without seasonal adjustments, there was a 9-basis-point deterioration. Delinquency has more than doubled over the past decade, while the rate on subprime mortgages has skyrocketed more than a thousand BPS since the high-flying days just before the real estate bubble popped.

On a seasonally adjusted basis, the Mortgage Bankers Association reported that third-quarter delinquency of at least 30 days, including foreclosures, fell 45 BPS from the second quarter to 12.42 percent.

The rate improved 110 BPS from the same period last year.

Excluding foreclosures, the seasonally adjusted 30-day rate was 7.99 percent — the lowest rate since 7.88 percent in the fourth-quarter 2008.

To put delinquency in perspective, the seasonally adjusted rate, excluding foreclosures, started out the new century at just 3.75 percent in the first-quarter 2000. Delinquency rose to 5.27 percent by the second-quarter 2002 and fell back to 4.31 percent in the first-quarter 2005 — the lowest it has been since.

But without the seasonal adjustments, the total delinquency rate deteriorated to 12.63 percent during the third quarter from 12.54 percent in the second quarter. However, the unadjusted rate has tumbled from the same period last year, when it was 13.78 percent.

The statistics reflect data on 43,526,357 loans accounting for 88 percent of all outstanding first liens in the country, MBA said.

Excluding loans in foreclosure, the unadjusted 30-day rate was 8.20 percent, 9 BPS worse than in the prior period but 119 BPS better than the same quarter last year.

The foreclosure rate, which doesn’t reflect seasonal adjustments, was 4.43 percent in the most-recent quarter, unchanged from three months prior. But foreclosures have deteriorated from 4.39 percent a year prior.

MBA reported that foreclosures started during the quarter accounted for 1.08 percent of outstanding loans, growing from 0.96 percent in the second quarter. Still, it was the second-best rate during the past three years.

“The increase in the foreclosure starts rate this quarter was driven by large increases from just a few servicers, concentrated in certain ‘hardest hit’ states,” MBA Vice President of Research and Economics Michael Fratantoni explained in the report.

On prime mortgages, and adjusting for seasonal variances, total delinquency dropped to 8.56 percent from the second quarter’s 9.06 percent. The foreclosure inventory on prime loans slipped 3 BPS to 3.37 percent.

Total subprime delinquency retreated to 37.62 percent from 39.22 percent, while the subprime foreclosure rate eased to 14.84 percent from 14.89 percent.

The subprime rate without foreclosures finished the third quarter at 22.78 percent. While that is a nice improvement from the 27.21 percent peak reached in the first quarter of last year, it’s a lot worse than the 10.33 percent rate in the second-quarter 2005 — when credit was easily available and borrowers could quickly refinance out of distressed situations.

Moving on to mortgages insured by the Federal Housing Administration, the third-quarter rate with seasonal adjustments and including foreclosures was 15.36 percent, lower than the second quarter’s 15.86 percent. The improvement reflects a decline in FHA early-stage delinquency, as the 90-day rate was up 17 BPS.

By state, Mississippi’s 13.18 percent was the highest 30-day rate excluding foreclosures, and Florida’s 14.49 percent foreclosure rate was the only state in the double digits.

On the other side of the coin, North Dakota’s 3.34 percent 30-day rate, excluding foreclosures, was lowest, and Alaska’s 0.93 percent foreclosure rate was the best of any state.

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