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Delinquency Surges

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Quarterly delinquency reached the highest level in more than 20 years, while foreclosures reached the highest level ever. Variable rate subprime loans were responsible for most of the rise in foreclosure activity.

Third quarter residential delinquency, excluding loans in the foreclosure process, was 5.59%, the Mortgage Bankers Association reported in its National Delinquency Survey today. Delinquency jumped 47 basis points from the second quarter and was 92 BPS higher than a year earlier.

Subprime loans performed most poorly, with delinquency jumping 149 BPS to 16.31%, while only rising 34 BPS for FHA loans and 39 BPS for prime loans, MBA said. The states with the highest delinquency were Mississippi, at 10.6%; Michigan, with a rate of 8.34%; and Georgia, at 7.93%.

“This is the first quarter which registers the full combined effects of the seizure of the nonconforming securitization market, broad-based home price declines, continued weakness in some regional economies and rate adjustments on monthly payments,” MBA Chief Economist Doug Duncan explained in the announcement.

The Washington, D.C.-based trade group reports delinquency figures on a seasonally adjusted basis.

The foreclosure rate ended the latest period at 1.69%, rising 29 BPS from the second quarter and up 0.64% from the third quarter last year, MBA said. Loans entering foreclosure were 0.78%, up 13 BPS from the prior quarter.

Subprime adjustable-rate mortgages also drove the quarterly increase in foreclosures, soaring 0.88% to 4.72%, the data indicated. Even prime ARM foreclosures jumped, up 40 BPS to 1.02%.

“While subprime ARMs only represent 6.8% of the loans outstanding, they represent 43.0% of the foreclosures started during the third quarter,” MBA stated.

The foreclosure rate was highest in Ohio, at 3.72%; followed by Indiana, with a 3.28% rate; and Michigan, at 3.07%, the release said.

Serious delinquency, loans at least 90 days past due — including foreclosures, was 2.95% on Sept. 30, up from 2.47% on June 30 and 2.00% a year earlier, the report indicated.

Total delinquency was higher than at any point since 1986, while foreclosures have never been this high, according to the report.

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