Fewer homeowners were falling behind on their mortgage payments in the fourth quarter, suggesting improvements in the economy were beginning to ease the foreclosure crisis.
The Mortgage Bankers Association on Thursday reported that the delinquency rate for mortgage loans on single-family and up-to-four-unit multifamily residential properties decreased to a seasonally adjusted rate of 8.22% as of the end of the fourth quarter of 2010, a decrease of 91 basis points from the third quarter of 2010 and of 125 basis points from a year earlier. It was the lowest level since yearend, 2008.
The unadjusted rate decreased 46 basis points to 8.93% from 9.39% in the prior quarter. 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 going into foreclosure was 1.27%, down seven basis points from previous quarter and up seven basis points from one year before.Loans in the foreclosure process at the end of the fourth quarter came in at 4.63%, up 24 basis points from the third quarter of 2010 and up five basis points from the fourth quarter of 2009. The serious delinquency rate (90 days or more past due or in the process of foreclosure) was 8.57%, down 13 basis points from last quarter and 110 basis points from the fourth quarter of last year. The combined percentage of loans in foreclosure or at least one payment past due was 13.56% on a non-seasonally adjusted basis, a 22 basis point decline from 13.78% last quarter.
"These latest delinquency numbers represent significant, across the board decreases in mortgage delinquency rates in the US, " said Jay Brinkmann, MBA's chief economist. "While delinquency and foreclosure rates are still well above historical norms, we have clearly turned the corner."
"Mortgages only one payment past due are now at the lowest level since the end of 2007, the very beginning of the recession," he continued. "Perhaps most importantly, loans three payments (90 days) or more past due have fallen from an all-time high delinquency rate of 5.02% at the end of the first quarter of 2010 to 3.63% at the end of the fourth quarter of 2010."
Still, there are many more foreclosures to come.
"While the foreclosure starts rate fell during the fourth quarter, the percentage of loans in foreclosure rose to equal the all-time high," noted Mike Fratantoni, MBA's vice president for single family research. "As we predicted last quarter, the percentage of loans in the foreclosure process increased in the fourth quarter, largely due to the foreclosure paperwork issues that were being addressed in September and October. These issues caused a temporary halt in foreclosure sales, particularly in states with judicial foreclosure regimes, such as New Jersey, Florida, and Illinois."
Forty five states saw increases in the rate of foreclosure starts on a year over year basis, with the largest increases coming in Washington, Rhode Island and the District of Columbia. The largest decreases were in Florida, Connecticut, and Maryland. Nevada and Arizona top the rankings in terms of foreclosure starts and loans in foreclosure across most loan types.
Said Brinkman, "Absent a significant economic reversal, the delinquency picture should continue to improve during 2011."