More Homeowners Falling Behind On Mortgage Payments

The pace of foreclosures may have slowed but homeowners appear to still be struggling. The latest lender data shows an uptick in late loan payments.

The Mortgage Bankers Association's (MBA) National Delinquency Survey shows the delinquency rate for mortgage loans on one-to-four-unit residential properties increased to a seasonally adjusted rate of 8.44 percent of all loans outstanding as of the end of the second quarter of 2011. That's up slightly from the first quarter but down nearly one and a half percent from the second quarter of 2010.

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 second quarter was 4.43 percent, down nine basis points from the first quarter and 14 basis points lower than one year ago.

Fewer 'serious' delinquencies

There is a bit of good news. The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 7.85 percent, a decrease of 25 basis points from last quarter, and a decrease of 126 basis points from the second quarter of last year.

"While overall mortgage delinquencies increased only slightly between the first and second quarters of this year, it is clear that the downward trend we saw through most of 2010 has stopped,” said Jay Brinkmann, MBA's Chief Economist. “Mortgage delinquencies are no longer improving and are now showing some signs of worsening. The good news is the continued decline in long-term delinquencies, those mortgages that are three payments or more past due. The bad news is that drop is offset by an increase in newly delinquent loans one payment past due."

Unemployment a big factor

MBA said mortgage loans that are one payment, or 30 days, past due are driven by changes in the labor market. Brinkman says the increase in these delinquencies clearly reflects deterioration in the labor market during the second quarter. If, indeed, the U.S. slides back into a recession, more delinquencies can be expected.

"Foreclosure start rates fell to their lowest level since the fourth quarter of 2007,” said Brinkman. “Foreclosure inventory rates also fell, to their lowest level since the third quarter of 2010. While some have argued that this drop in foreclosures is a temporary drop which does not reflect the problems yet to come, this does not appear to be the case, at least at the national level. There are still many problem loans that need to be resolved, but the idea that there is a growing backlog of loans being held back from foreclosure is simply not supported by these numbers.”