Despite the industry's unprecedented efforts to keep people in their homes, there are more borrowers behind on their mortgage payments than there have been in 37 years. Even the end of the recession Ã¢â‚¬" which economists put at mid-summer Ã¢â‚¬" hasn't slowed the decline in mortgage performance.
The national delinquency rate for loans on one-to-four-unit residential properties rose to 9.64 percent in the third quarter, the Mortgage Bankers Association (MBA) reported Thursday.
That figure is up 40 basis points from the second quarter of 2009, and up 265 basis points compared to one year ago. The Q3 delinquency rate breaks the record set last quarter, and is the highest ever recorded in MBA's study, dating back to 1972.
The delinquency rate includes loans that are at least one payment past due but not yet pushed into the foreclosure process. The percentage of loans in foreclosure at the end of the third quarter was 4.47 percent, and when combined with the number of past-due loans, it means a staggering 14.41 percent of all outstanding mortgages aren't current Ã¢â‚¬" another record for MBA's national delinquency study.
According to Jay Brinkmann, MBA's chief economist, job losses continue to be the primary driver behind the delinquency and foreclosure increases.
""Over the last year, we have seen the ranks of the unemployed increase by about 5.5 million people, increasing the number of seriously delinquent loans by almost 2 million loans and increasing the rate of new foreclosures from 1.07 percent to 1.42 percent,"" Brinkmann said.
Unemployment seems to be hitting credit-worthy prime borrowers the hardest. Brinkmann says prime fixed-rate loans continue to represent the largest share of foreclosures started and are the reason for the overall increase in foreclosures.
Thirty-three percent of foreclosures started in the third quarter were on prime fixed-rate mortgages and those loans were 44 percent of the quarterly increase in foreclosures.
""The foreclosure numbers for prime fixed-rate loans will get worse because those loans represented 54 percent of the quarterly increase in loans 90 days or more past due,"" Brinkmann said.
The performance of prime adjustable-rate mortgages (ARMs), which include pay-option ARMs, also continue to deteriorate, MBA said. In contrast, both subprime fixed-rate and subprime adjustable-rate loans saw decreases in foreclosures.
The foreclosure rate on Federal Housing Administration (FHA) loans also increased to 1.31 percent of the agency's insured loans, based on MBA's analysis. The number of FHA loans outstanding has grown by about 1.1 million over the last year, and according to Brinkmann, this increase depresses the current delinquency and foreclosure percentages, so the fact that those still jumped could signal more delinquency troubles to come for the federal agency.
Once again the states of Florida, California, Arizona, and Nevada were home to a disproportionate share of the mortgage problems. According to MBA's data, these usual suspects had 43 percent of all foreclosures started in the third quarter, 37 percent of the nation's prime fixed-rate foreclosure starts, and 67 percent of all prime ARM foreclosures initiated.
Florida leads the nation in poor mortgage performance. MBA reported that as of the end of September, 25 percent of home loans in the Sunshine State were at least one payment past due or in foreclosure.
So what's the outlook for the industry as a whole? Brinkmann says to expect delinquency and foreclosure rates to go even higher before they improve. His wary forecast is based largely on the nation's unemployment picture, which he says won't get any better until later next year and even then the pace of job increases will be slow out of the gate.
In addition, Brinkmann noted that the number of loans 90 days or more past due or in foreclosure is now a little over 4 million.
""The ultimate resolution of these seriously delinquent loans will put added pressure on the hardest hit sections of the country,"" Brinkmann explained.