Survey: Delinquency Rates Up, Foreclosure Starts Flat in Q2

The latest National Delinquency Survey from the ""Mortgage Bankers Association"":http://www.mortgagebankers.org/default.htm (MBA) showed that delinquencies increased in the second quarter of 2012, a shift anticipated by the association.

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The delinquency rate for mortgage loans on one-to-four-unit residential properties increased to a seasonally adjusted rate of 7.58 percent as of the end of Q2, an increase from 7.40 in Q1. It is typical for delinquency rates to increase between the first and second quarters of the year.

The second quarter's increased rate was still down from 8.44 percent at the same time in 2011.

On a seasonally adjusted basis, the overall delinquency rate increased for all loan types except FHA loans. Subprime loans saw the biggest increase in delinquency, with the seasonally adjusted rate jumping to 19.85 percent for subprime fixed loans and 22.60 percent for subprime adjustable-rate loans.

Delinquency on FHA loans declined, with the delinquency rate falling to 11.89 percent from an even 12.00 percent in Q1.

MBA chief economist Jay Brinkmann said the scale of the increase in delinquency is not as notable as the fact that delinquency rates are no longer falling. It is unknown if the increase in delinquency rates is a temporary situation or a sign of things to come.

""Mortgage delinquencies were up only slightly over the last quarter. Perhaps more important than the small size of the increase, however, is the fact that it reversed the trend of fairly steady drops in delinquencies we have seen over the last year,"" Brinkmann said. ""This is consistent with the slowdown in the economy during the first half of the year and our stubbornly high unemployment rate. Whether this is just a temporary blip or a sign of a true change in direction for mortgage performance will fundamentally depend on the direction of employment over the remainder of the year.""

Foreclosure starts stayed flat, and the percentage of loans in foreclosure at the end of Q2 fell to 4.27 percent. The serious delinquency rate (for loans that are 90 or more days past due or are in the process of foreclosure) was 7.31 percent, a decrease from last quarter and last year.

FHA reported a relatively large increase in foreclosure starts, with the seasonally adjusted rate hitting 1.72 percent. The jump in starts is not reflective of the performance of the performance of FHA loans, however; MBA attributed the increase to the resumption of foreclosure proceedings after the national mortgage settlement, as most of these loans had been seriously delinquent for some time.

""While the rate of foreclosure filings was unchanged, that rate would have fallen were it not for the considerable jump in foreclosure starts on FHA loans,"" Brinkmann said. ""This quarter's rate set an all-time record for FHA loans, but it was only slightly higher than the previous high set in 2010. The jump was due to one or more large servicers of FHA loans restarting foreclosure actions on delinquent FHA loans after the completion of the Department of Justice review and the mortgage servicing settlement.""

While foreclosure starts didn't seem to be affected by judicial or non-judicial state status, MBA's survey showed a discernible difference in foreclosure percentages between the two types of state. Of the 12 states whose foreclosure percentages exceeded the national average, 11 are judicial states. The only outlier was Nevada.

Maryland saw the greatest number of foreclosure starts by far, with 1.95 percent of loans going into the foreclosure process by the end of the quarter. In terms of total foreclosure percentages, Florida ranked number one with 13.70 percent, nearly double the second-ranked state (New Jersey at 7.65 percent).

""Among the states, the rate of new foreclosure actions in Maryland was the highest in the nation during the second quarter, more than double the national average. The Maryland numbers, however, were largely driven by the resumption of foreclosures following the servicing settlement,"" Brinkmann said.

""In terms of the percentage of loans in foreclosure, Florida continues to lead the nation at 13.7 percent, more than three times the national average, followed by New Jersey at 7.7 percent, Illinois at 7.1 percent and New York at 6.5 percent. In contrast, Arizona and California, two of the states hit hardest by the housing downturn, are at 3.2 percent and 3.1 percent respectively, both more than a full percentage point below the national average.""