The delinquency rate for residential mortgage loans dropped to a seasonally adjusted rate of 6.41 percent at the end of the third quarter of 2013, according to a new survey from the Mortgage Bankers Association’s (MBA). That’s the lowest level since the second quarter of 2008.
The delinquency rate dropped 55 basis points from the previous quarter, and 99 basis points from one year ago, according to the MBA’s National Delinquency Survey.
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 third quarter was 3.08 percent, down 25 basis points from the second quarter and 99 basis points lower than one year ago. This was the lowest foreclosure inventory rate seen since 2008.
The percentage of loans on which foreclosure actions were started during the third quarter decreased to 0.61 percent from 0.64 percent, a decrease of three basis points, and the lowest level since early 2007.
The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 5.65 percent, a decrease of 23 basis points from last quarter, and a decrease of 138 basis points from the third quarter of last year. The MBA noted, however, that a number of loans have been transferred to the a specialty servicer which does not participate in its survey.
The combined percentage of loans at least one payment past due or in foreclosure was the lowest in five years, decreasing to 9.75 percent on a non-seasonally adjusted basis, 38 basis points lower than last quarter and 196 basis points lower than the same quarter one year ago.
"States with judicial foreclosure systems still account for most of the loans in foreclosure. While the percentages of loans in foreclosure dropped in both judicial and nonjudicial states, the average rate for judicial states was 5.28 percent, more than triple the average rate of 1.66 percent for nonjudicial states," Jay Brinkmann, the MBA’s chief economist, said in a statement.
Mortgage servicers are already reducing the number of staff they keep on hand to handle distressed loans, Brinkmann said. But since price are not yet back to their 2007 highs in much of the country, a large number of loans still present an elevated risk of delinquency and foreclosures, he suggested.
"[E]ven if the economy continues to improve, those loans are more likely to proceed to foreclosure in the event of a divorce, illness or loss of a job because of lack of borrower equity. This will keep the foreclosure rates above historical norms for a few more years despite the strong credit standards of recent vintages," Brinkmann said in the statement.
