The residential mortgage delinquency rate dropped to 5.54 percent for Q1 2015, its lowest level since Q2 2007 just prior to the recession, according to the quarterly National Delinquency Survey released by the Mortgage Bankers Association (MBA) on Wednesday.
The Q1 decline in delinquency rate (which includes loans that are 30 days or more overdue but not in foreclosure) represented a drop of 14 basis points quarter-over-quarter and 57 basis points year-over-year, according to MBA.
Foreclosure inventory – the percentage of loans in some stage of foreclosure – declined by five basis points from Q4 to Q1 down to 2.22 percent. This number represented a decline of 43 basis point year-over-year, and it was also the lowest rate for foreclosure inventory since Q4 2007.
"Delinquency rates and the percentage of loans in foreclosure continued to fall in the first quarter and are now at their lowest levels since 2007," said Joel Kan, MBA's Associate Vice President of Industry Surveys and Forecasting. "The job market continues to grow, and this is the most important fundamental improving mortgage performance. Additionally, home prices continued to rise, as did the pace of sales, thus increasing equity levels and enabling struggling borrowers to sell if needed."
According to Kan, foreclosure inventory has declined for 12 consecutive quarters and at 2.22 percent is approximately half of its peak levels in 2010.
The serious delinquency rate, which is the percentage of loans 90 days or more overdue or in foreclosure declined substantially in Q1 down to 4.24 percent – a drop of 28 basis points from Q4 2014 and 80 basis points from the same quarter a year earlier.
The only delinquency category that did not see a substantial decline in Q1 was foreclosure starts (0.45 percent), which fell by one basis point quarter-over-quarter and remained unchanged year-over-year.
"With a declining 90+ day delinquency rate and the improving credit quality of new loans, we expect that the foreclosure inventory rate will continue to decline in coming quarters," Kan said. "Foreclosure starts decreased one basis point from the previous quarter, and continue to fluctuate from quarter to quarter mainly due to state-level differences in the speed of the foreclosure process. At 0.45 percent, the level of foreclosure starts is at its long run average."
Kan said that while overall delinquencies for FHA-backed loans declined by 47 basis points year-over-year, foreclosure inventory and foreclosure starts increased by 12 basis points and nine basis points, respectively. Loans with vintages of 2008 through 2010 – at the height of the crisis – comprised a large portion of the weakness in FHA loans, according to Kan.
Also according to the survey, the percentage of mortgage loans in foreclosure in judicial states for Q1 (3.64 percent) was approximately three times the foreclosure inventory in non-judicial states (1.22 percent). For states that utilize both judicial and non-judicial processes for foreclosure, the inventory was 1.43 percent.