In a sign that the sluggish economy is taking a toll on the mortgage market, the delinquency rate for loans on one-to-four-unit residential properties increased to a seasonally adjusted rate of 8.44% of all loans outstanding as of the end of the second quarter, up 12 basis points from the first quarter but 141 basis points below a year earlier, the Mortgage Bankers Association said Monday.
The unadjusted delinquency rate increased 32 basis points from the first quarter to 8.11%. The delinquency rate includes loans that are at least one payment past due but on which foreclosure have not been taken.
The delinquency rate increased for all loan types. The seasonally adjusted delinquency rate increased 15 basis points to 4.74% for prime fixed loans and increased 51 basis points to 11.76% for prime ARM loans. For subprime loans, the delinquency rate increased 58 basis points to 22.62% for subprime fixed loans and increased 87 basis points to 27.18% for subprime ARMs. FHA and VA loans rated rose 59 basis points to 12.62% for FHA loans and increasing 12 basis points to 7.05% for VA loans.
The percent of loans in foreclosure--the foreclosure inventory rate--decreased nine basis points overall to 4.43%, down 3 basis points to 2.56% for prime fixed loans, down 37 basis points to 9.16% for prime ARMs, down 3 basis points to 22.23% for subprime ARMs, down nine basis points to 2.3% for VA loans down 11 basis points to 3.24% for FHA loans. Subprime fixed loans increased 48 basis points to 11.01%.
While delinquencies were up, the percentage of loans on which foreclosure started was down 12 basis pints from the first quarter and 15 from last year's second quarter to a rate of 0.96%. The percentage of loans in foreclosure was 4.43%, down 9 basis points from the first quarter and 14 basis points lower than a year earlier. 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%, a decrease of 25 basis points the first quarter and a drop of 126 basis points from the second quarter of last year.
The combined percentage of loans in foreclosure or at least one payment past due was 12.54% on an unadjusted basis, a 23 basis point increase from last quarter but still 143 basis points lower than a year earlier.
The MBA took the data as evidence that the slowdown in defaults and foreclosures has ended.
"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, chief economist at the MBA. "Mortgage delinquencies are no longer improving and are now showing some signs of worsening."
Brinkmann continued, "Mortgage loans that are one payment, or 30 days, past due are very much driven by changes in the labor market, and the increase in these delinquencies clearly reflects the deterioration we saw in the labor market during the second quarter."
Still, long-term delinquencies, mortgages that are three payments or more past due, continued their decline, but were partly offset by an increase in loans one payment past due. Also, foreclosure start rates fell to the lowest level since fourth quarter, 2007, and foreclosure inventory rates also fell to the lowest level since the third quarter of 2010.
Brinkmann took issue with the widely held notion that there is a large backlog of foreclosures that have been stalled by banks. "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," he said. "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."
According to the MBA mortgage delinquency survey, the percentage of loans 90 days or more past due continues to fall along with the foreclosure rate and is at the lowest point since the beginning of 2009. Said Brinkmann, "Were there a growing backlog, we would expect to see the 90-plus day delinquent category increasing. Rather than increasing, seriously delinquent loans, those either 90 days or more past due or somewhere in the foreclosure process, declined for the fourth consecutive quarter, reaching their lowest level since the first quarter of 2009. Perhaps most importantly, the vast majority of these distressed loans were originated before 2008. "
On a year-over-year basis, the foreclosure inventory rate increased 20 basis points for prime fixed loans and increased 211 basis points for subprime fixed loans and fell 100 basis points for prime ARM loans, 76 basis points for subprime ARM loans, 38 basis points for FHA loans, and 20 basis points for VA loans.
Also year-over-year, the unadjusted foreclosure starts rate decreased nine basis points for prime fixed loans, 14 basis points for prime ARM loans, 29 basis points for FHA loans and 15 basis points for VA loans. The foreclosure starts rate increased 14 basis points for subprime fixed loans and increased23 basis points for subprime ARM loans.