Mortgage Delinquencies, Foreclosure Starts Decline
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- Kara Johnson | August 27, 2010
Rates of mortgage delinquencies and foreclosure starts fell in the second quarter of the year, raising hopes that economic pressures on homeowners may be easing.
The overall delinquency rate fell to a seasonally adjusted 9.85 percent of all homeowner mortgage loans, down 21 basis points from 10.06 percent in the first quarter. New foreclosures fell to 1.11 percent of all residential mortgage loans, down 12 basis points from last quarter and 25 basis points from one year ago.
Total foreclosures down for first time in four years
In addition, the total number of homes in the foreclosure process declined for the first time since 2006. The figures were released today in by the Mortgage Bankers Association in its quarterly delinquency survey.
The report contained good news and bad news, according to Jay Brinkmann, MBA chief economist. He noted that the decline in total foreclosures, combing with a significant decline in mortgages past due by 90 days or more, meant that many of those seriously delinquent mortgages had been modified into performing loans.
At the same time, he noted that the number of short-term delinquencies (as opposed to total delinquencies) has been rising since the end of last year, which could translate into more foreclosures down the road. He said the rise was likely due to two factors: an increase in first-time unemployment claims and previously modified mortgages that are beginning to go bad again, given that those borrowers have weak credit to begin with.
Rebound tied to employment
"Ultimately the housing story, whether it is delinquencies, homes sales or housing starts, is an employment story,” Brinkmann said. “Only when we see a consistent increase in employment will we see an increase in sales and starts, and a sustained improvement in the delinquency numbers. Until we see the increase in the number of households that comes with an increase in the number of paychecks, all measures of the health of the housing industry will continue to be weak."
Despite the declines in the second quarter of 2010, the rates of both overall delinquencies and homes in foreclosure are higher than they were one year ago. Total delinquencies were up 61 basis points from a rate of 9.24 percent of all loans in the second quarter of 2009, while the percentage of all mortgages at some point in the foreclosure process was 4.57 percent, down six basis points from the previous quarter but a 27 point increase from one year before.
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