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Mortgage Delinquencies Continue to Climb

Filings for foreclosure continue to break records

March 6, 2009

The Mortgage Bankers Association's National Delinquency Survey shows the delinquency rate for mortgage loans on one-to-four-unit residential properties rose to a seasonally adjusted rate of 7.88 percent of all loans outstanding as of the end of the fourth quarter of 2008. That’s an increase of 89 basis points from the third quarter of 2008, and 206 basis points from one year ago.

The delinquency rate, which includes loans that are at least one payment past due — but does not include loans somewhere in the process of foreclosure, broke the record set last quarter while the quarter-to-quarter jump is the also the largest.

The records are based on MBA data dating back to 1972.

The percentage of loans in the foreclosure process at the end of the fourth quarter was 3.30 percent, an increase of 33 basis points from the third quarter of 2008 and 126 basis points from one year ago.

The combined percent of loans in foreclosure and at least one payment past due was 11.18 percent on a seasonally adjusted basis and 11.93 percent on a non-seasonally adjusted basis. Both of these numbers are the highest ever recorded in the MBA delinquency survey.

The percentage of loans on which foreclosure actions were started during the fourth quarter was 1.08 percent, up one basis point from last quarter and up 20 basis points from one year ago.

The percentages of loans 60 days past due, loans 90 days or more past due, and loans in foreclosure all set record highs, breaking records set last quarter. The percentage of loans on which foreclosure actions were started tied the record set in the first quarter of 2008.

However, the percentage of loans 30 days past due is still well below the record set in the first quarter of 1985.

"Foreclosure inventory jumped sharply in the fourth quarter even though the rate at which loans were entering foreclosure remained unchanged," said Jay Brinkmann, MBA's Chief Economist and Senior Vice President for Research and Economics. "This is mainly attributable to various state and local moratoria on foreclosure sales, the Fannie Mae and Freddie Mac halt on foreclosure sales announced in late November, a general reluctance by servicers to proceed with evictions in the last few weeks of December and a slowing down caused by an overburdened legal process in some areas."

The rate of new foreclosures has remained essentially flat for the last three quarters of 2008. This might be seen as a good sign for mortgage performance, but most other measures point to exactly the opposite conclusion. The percentage of loans 90 days or more past due jumped sharply in the fourth quarter.

Normally servicers would have initiated foreclosure actions on a significant portion of these loans but delayed doing so for a variety of reasons, including working on loan modifications, complying with the guidelines of different investors, and various delays in different locales. In addition, some servicers report an increase in borrowers running their accounts 90 days delinquent in order to qualify for certain modifications.

Subprime ARM loans and prime ARM loans, which include Alt-A and pay option ARMs, continue to dominate the delinquency numbers. Nationwide, 48 percent of subprime ARMs were at least one payment past due and in Florida over 60 percent of subprime ARMs were at least one payment past due.

In addition, the delinquency rates continue to climb across the board for prime fixed-rate and subprime fixed-rate loans, loans whose performance is driven by the loss of jobs or income rather than changes in payments.

"While California, Florida, Nevada, Arizona and Michigan continue to dominate the delinquency numbers, some of the sharpest increases we saw last quarter in loans 90 days or more delinquent were in Louisiana, New York, Georgia, Texas and Mississippi, signs of the spreading impact of the recession," Brinkmann said.

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