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Delinquency Study Indicates Housing Is Nearing Pre-Crisis Norms

Delinquency and foreclosure data reveals the housing market is heading back to pre-crisis norms, according to the ""Mortgage Bankers Association's (MBA's)"":http://mbaa.org/default.htm National Delinquency Survey released Thursday. The percentage of home loans in delinquency or foreclosure was 9.75 percent as of the third quarter, the lowest level in about five years, according to the trade group's report.


""We are now back to pre-crisis levels by almost any measure,"" said Mike Fratantoni, MBA's VP of research and economics, during a press conference Thursday morning.

Jay Brinkmann, chief economist and SVP for research and education, noted ""major drops across the board in all types and categories with a few minor exceptions"" are evident in the latest survey results.

The MBA report revealed drops in 30-, 60-, and 90-day delinquencies as well as foreclosure inventory at the national level. Brinkmann credited the improvement to the higher quality loans that have been written since the recession, adding that the delinquencies occurring today are the results of ""problems of the past.""

The national delinquency rate as of the third quarter was 6.41 percent, which is the lowest level since the second quarter of 2008, according to MBA.

Serious delinquencies dropped 138 basis points over the previous 12 months to hit 5.65 percent in the third quarter, and foreclosure inventory dropped 99 basis points to 3.08 percent, MBA reported.


Brinkmann called attention to the delinquency rate among Department of Veterans Affairs (VA) loans--now 5.41 percent--which is its lowest level since 1980. He notes 40 percent of today's VA loans have been written since the crisis, thus increasing the denominator of higher-quality loans and leading to the steep decline in delinquencies.

Just as declining delinquency rates are approaching pre-crisis levels, foreclosure starts have nearly hit that mark as well. The foreclosure start rate in the third quarter was 0.6 percent, down from a peak of 1.4 percent and near pre-crisis levels which hovered around 0.4 percent.

States with the highest foreclosure starts in the third quarter were New Jersey, Florida, and Nevada.

While foreclosure starts are generally even across judicial and non-judicial states, Brinkmann noted that in Q3 judicial states tended to post higher foreclosure start rates. In fact, of the 18 states with foreclosure start rates exceeding the national average, 13 were judicial states, according to Brinkmann.

On the other hand, foreclosure inventories have been, and continue to be, higher in judicial states. For all judicial states, foreclosure inventory is 5.28 percent of outstanding mortgages; the non-judicial rate is 1.66 percent.

Foreclosure inventory was highest in Florida (9.48 percent), New Jersey (8.28 percent), and New York (6.34 percent), although Brinkmann pointed out that Florida's foreclosure inventory declined over the quarter, while New Jersey's and New York's increased.

With delinquencies and foreclosures approaching pre-crisis levels, Brinkmann said during Wednesday's call, ""We're back to the point where it's underlying economic factors impacting the market.""

Brinkmann elaborated in a supplementary press statement, saying, ""[W]e are now at a point where local economic growth and population movements will determine housing demand and mortgage performance. Those areas with the weaker climates for economic growth will see home value and delinquency problems that are beyond the abilities of the mortgage industry and housing regulators to impact in a meaningful way.""


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