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Delinquency Improvement is Sweeping

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Seasonally adjusted residential delinquency declined 90 basis points, the government delinquency rate was 107 BPS better and the subprime rate improved 144 BPS. But the trade group that issued the good news is cautious about the outlook.

Including loans in foreclosure and loans past due at least 30 days, residential delinquency closed out the third quarter at 13.78 percent in the Mortgage Bankers Association’s National Delinquency Survey.

The rate of late payments improved from 13.97 percent in the second quarter. It was also better than 14.41 a year earlier.

The trade group said that 43,967,725 U.S. loans were covered in the survey, which has been conducted since 1953. The sample represents around 88 percent of all first-lien mortgages.

“Although the employment report for October was relatively positive, the job market had improved only marginally through the third quarter, so while there was a small improvement in the delinquency rate, the level of that rate remains quite high,” MBA Vice President of Research and Economics Michael Fratantoni said in an accompanying news release. “As we anticipate that the unemployment rate will be little changed over the next year, we also expect only modest improvements in the delinquency rate.”

Third-quarter delinquency, excluding foreclosures, was 9.39 percent, edging a basis point lower than the prior period.

Foreclosures fell to 4.39 percent from 4.57 percent.

“The foreclosure paperwork issues announced by several large servicers in late September and early October are unlikely to have had a large impact on the third quarter numbers,” Fratantoni explained, “but may well increase the foreclosure inventory numbers in the fourth quarter of 2010 and in early 2011.”

After making seasonal adjustments, MBA said the overall U.S. rate was 13.52 percent — better than the second quarter’s 14.42 percent seasonally adjusted 30-day rate and 14.11 percent on Sept. 30, 2009.

Seasonally adjusted delinquency on just prime mortgages fell to 9.75 percent from the second quarter’s 10.59 percent. Subprime delinquency tumbled 144 BPS to 39.96 percent.

FHA delinquency was also better, falling to 15.84 percent from the previous period ‘s 16.91 percent. Late payments on loans guaranteed by the Department of Veterans Affairs declined to 9.58 percent from the second quarter’s 10.29 percent.

MBA said that as the subprime and prime-ARM book of loans has rapidly diminished, prime fixed-rate mortgages and FHA loans have grown to account for almost 78 percent of mortgages outstanding and for more than half of foreclosures started in the quarter compared to 39 percent a year ago.

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