Delinquencies Rise, Foreclosure Rate Sets Record

By:
Kirk Haverkamp | May 20, 2010

More than one borrower in 10 is behind on their mortgage payments, according to a new report, as mortgage delinquencies continue to rise despite signs of an economic recovery. 

The Mortgage Bankers Association reported Wednesday that mortgage delinquencies rose to a seasonally adjusted rate of 10.06 percent in the first quarter of the year, up from 9.47 percent in the fourth quarter of 2009.
 
That figure doesn’t include the number of homes in the foreclosure process, which rose incrementally to 4.63 percent of all outstanding loans, up from 4.58 percent the previous quarter and a new record high. The rate of homes entering the foreclosure process rose to 1.23 percent of all mortgages, up from 1.20 percent from the last quarter of 2009.
 

Signs of improvement suggested

 
Despite the increases in the official numbers, the mortgage delinquency and foreclosure picture may actually be improving, according to Jay Brinkman, the MBA’s chief economist. He notes that actual delinquencies, not adjusted for seasonal factors, fell during the first quarter of the year, as typically happens. However, he said it’s not clear if the decline is due to seasonal factors or to more underlying changes in the housing market.
 
"The issue this quarter is that the seasonally adjusted delinquency rates went up while the unadjusted rates went down,” Brinkmann explained. “Delinquency rates traditionally peak in the fourth quarter and fall in the first quarter and we saw that first quarter drop in the data.  The question is whether the drop represents anything more than a normal seasonal decline or a more fundamental improvement.”
 
“Most importantly, the normal seasonal drop is coming right at the point where we believe delinquencies could potentially be declining and the problem for the statistical models is determining which is which," he said.
 

Serious delinquencies decline

 
One positive sign was that the number of serious delinquencies, mortgages past due by 90 days or more, including those in foreclosure, declined in the first quarter of the year, to 9.54 percent of all loans, down13 basis points from the previous quarter. Even so, it still represented a significant annual increase over the 7.24 rate reported in the first quarter of 2009.
 
Overall, the seasonally adjusted delinquency rates was up almost a full percentage point from last year, an increase of 94 basis points from the first quarter of 2009. New foreclosure actions were down slightly for the year, declining 14 basis points from the first quarter of last year.
 
Nearly half of all states saw increases in the rate of new foreclosures compared to one year ago, with Oregon, North Carolina and Maryland posting the biggest increases. However, two of the states hardest hit by the foreclosure crisis were among the three posting the biggest decreases in new foreclosures, with Florida and California joined by Rhode Island in showing the biggest declines in foreclosure starts compared to the first quarter of 2009.

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