MBA: Delinquency, Foreclosure Rates See Steep Declines in Q4

The national delinquency rate moved against the seasonal trend and declined from the third to fourth quarter, while foreclosure starts and the foreclosure inventory rate made history with their decreases, according to the ""Mortgage Bankers Association's"":http://www.mbaa.org/default.htm (MBA) National Delinquency Survey.

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In the fourth quarter of 2012, the national delinquency rate fell to 7.09 percent, a quarterly and yearly drop of 31 and 49 basis points, respectively, the MBA reported Thursday.

The delinquency rate is seasonally adjusted and includes one-to-four-unit residential properties. The MBA noted delinquency rates typically display an increase from Q3 to Q4, but even the non-seasonally adjusted rate dropped, falling 13 basis points to 7.51 percent.

The serious delinquency rate, which includes 90-plus delinquencies and loans in foreclosure, stood at 6.78 percent after shedding 25 basis points from Q3 and 95 basis points from the Q4 2011.

Foreclosure starts were down to the lowest level since the second quarter of 2007 after representing just 0.70 percent of loans in Q4, a decrease from 0.90 percent in Q3 and 0.99 in Q4 2011.

The foreclosure inventory rate also shrunk, falling below 4 percent to 3.74 percent. Compared to a year ago, the rate is 64 basis points lower and down 33 basis points from Q3.

""The foreclosure starts rate decreased by the largest amount ever in the MBA survey and now stands at half of its peak in 2009. Similarly, the 33 basis point drop in the foreclosure inventory rate is also the largest in the history of the survey,"" said Jay Brinkmann, MBA's chief economist and SVP of research.

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The MBA also reported the combined percentage of loans at least one payment past due or in foreclosure was down to 11.25 percent on a non-seasonally adjusted basis, which is a quarterly and yearly decrease of 46 basis points and 128 basis points, respectively.

Amid the positive developments, Brinkmann noted one cause for concern.

""One cautionary note is that the 90+ delinquency rate increased by 8 basis points, reversing a fairly steady pattern of decline and the largest increase in this rate in three years. While we normally see an increase in this rate in individual states when they change their foreclosure laws, 38 states had increases in the percentage of loans three payments or more past due, indicating that we could see a modest increase in foreclosure starts in subsequent quarters,"" Brinkmann said.

On a non-seasonally adjusted basis, the 90-plus delinquency rate was 3.04 percent in Q4.

The survey also examined mortgage performance for FHA loans, which were mixed across the board.

""While the foreclosure starts and foreclosure inventory percentages both fell, the delinquency percentages generally remained flat or increased slightly, particularly the percentage of loans 90 days or more past due,"" Brinkmann said. ""However, 44 percent of the FHA loans that are seriously delinquent were made in the years 2008 and 2009, while loans made in those years represent a smaller share of FHA's overall book of business.""

Brinkmann also noted Florida and the judicial process in some states continued to be problem areas for foreclosure inventory. MBA data shows foreclosure inventory is 6.22 percent in judicial states compared to 2.13 percent in non-judicial states.

""In those cases, the ultimate reduction in the number of loans in foreclosure will have less to do with the recovery of the economy and the housing market than with the return to reasonable foreclosure timelines,"" Brinkmann explained.

In addition, Florida's high foreclosure inventory rate of 12 percent is also impacting the national rate, according to the MBA.

The next three states with the highest foreclosure inventory rate were also judicial: New Jersey (9 percent), New York (6 percent), and Illinois (6 percent).