Delinquencies for loans on one to four-unit homes rose to a seasonally-adjusted rate of 9.64% of all outstanding mortgages in the U.S. for the third quarter, the Mortgage Bankers Association (MBA) reported today. Non-adjusted, the delinquency rate rose from 8.86% in the second quarter to 9.94% in the third quarter.

The mortgage delinquency rate is the highest on record since the MBA began keeping track in 1972. Loans are counted as delinquent when they are behind by at least one payment but are not yet in the process of foreclosure. The rate of U.S. foreclosures rose from the second quarter and was 4.47% at the end of the third quarter.

The total combined percentage of mortgages that were delinquent or in the process of foreclosure was 14.41% at the end of the third quarter, not seasonally-adjusted. This combined percentage is also the highest rate ever recorded by the MBA's delinquency survey.

MBA Chief Economist Jay Brinkman said, "Despite the recession ending in mid-summer, the decline in mortgage performance continues. Job losses continue to increase and drive up delinquencies and foreclosures because mortgages are paid with paychecks, not percentage point increases in GDP. Over the last year, we have seen the ranks of the unemployed increase by about 5.5 million people, increasing the number of seriously delinquent loans by almost 2 million loans and increasing the rate of new foreclosures from 1.07% to 1.42%."

Brinkman said that the largest share of foreclosures started were prime fixed-rate loans and are the biggest driver of the increase in foreclosures. He said that 33% of foreclosures started in the third quarter were on prime fixed-rate and loans and that those loans accounted for 44% of the quarterly increase in foreclosures.

"The foreclosure numbers for prime fixed-rate loans will get worse because those loans represented 54% of the quarterly increase in loans 90 days or more past due but not yet in foreclosure," he said. "The performance of prime adjustable rate loans, which include pay-option ARMs in the MBA survey, continue to deteriorate with the foreclosure rate on those loans for the first time exceeding the rate for subprime fixed-rate loans. In contrast, both subprime fixed-rate and subprime adjustable rate loans saw decreases in foreclosures."

A "disproportionate share of the mortgage problems" are in the states of Florida, California, Arizona and Nevada. The MBA reports that 43% percent of all foreclosures started in the third quarter are in those four hardest-hit states, down only slightly from 44% both last quarter and the third quarter last year. They had 37% of the nation’s prime fixed-rate loan foreclosure starts and 67% of the prime ARM foreclosure starts. The MBA reports that 25% of the mortgages in Florida were at least one payment past due or in foreclosure as of the end of September.

“The outlook is that delinquency rates and foreclosure rates will continue to worsen before they improve. First, it is unlikely the employment picture will get better until sometime next year and even then jobs will increase at a very slow pace. Perhaps more importantly, there is no reason to expect that when the economy begins to add more jobs, those jobs will be in areas with the biggest excess housing inventory and the highest delinquency rates," Brinkman said. "Second, the number of loans 90 days or more past due or in foreclosure is now a little over 4 million as compared with 3.9 million new and previously occupied homes currently for sale, although there is likely some overlap between the two numbers. The ultimate resolution of these seriously delinquent loans will put added pressure on the hardest hit sections of the country.”


Source:
Mortgage Bankers Association