There was some good news today about consumers' economic situation, in a report showing the number of homeowners who have fallen behind of mortgage payments actually declined in the last month of 2010.
The Mortgage Bankers Association released its report for the fourth quarter, showing the delinquency rate for mortgage loans on one-to-four-unit residential properties decreased to a seasonally adjusted rate of 8.22 percent of all loans outstanding as of the end of the fourth quarter of 2010. That's a decline of 91 basis points from the third quarter of 2010, and a decrease of 125 basis points from one year ago.
The non-seasonally adjusted delinquency rate decreased 46 basis points to 8.93 percent this quarter from 9.39 percent last quarter.
Across the board decrease
"These latest delinquency numbers represent significant, across the board decreases in mortgage delinquency rates in the U.S.," said Jay Brinkmann, MBA's chief economist. "Total delinquencies, which exclude loans in the process of foreclosure, are now at their lowest level since the end of 2008."
Mortgages only one payment past due are now at the lowest level since the end of 2007, the very beginning of the recession. Perhaps most importantly, loans three payments (90 days) or more past due have fallen from an all-time high delinquency rate of 5.02 percent at the end of the first quarter of 2010 to 3.63 percent at the end of the fourth quarter of 2010, a drop of 139 basis points or almost 28 percent over the course of the year. Every state but two saw a drop in the 90-plus day delinquency rate and the two increases were negligible.
Foreclosures still working through the system
The percentage of loans on which foreclosure actions were started during the fourth quarter was 1.27 percent, down seven basis points from last quarter and up seven basis points from one year ago. The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure.
The percentage of loans in the foreclosure process at the end of the fourth quarter was 4.63 percent, up 24 basis points from the third quarter of 2010 and up five basis points from one year ago. The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 8.57 percent, a decrease of 13 basis points from last quarter, and a decrease of 110 basis points from the fourth quarter of last year.
The report suggests, at the very least, that current homeowners, those who haven't already lost their homes due to foreclosure, are better able to make their payments, despite stubbornly high unemployment .
"While delinquency and foreclosure rates are still well above historical norms, we have clearly turned the corner," Brinkman said. "Despite continued high levels of unemployment, the economy did add over 1.2 million private sector jobs during 2010 and, after remaining stubbornly high during the first half of 2010, first time claims for unemployment insurance fell during the second half of the year. Absent a significant economic reversal, the delinquency picture should continue to improve during 2011."
