Third-quarter delinquency rates for both residential and commercial mortgages are expected to increase, particularly among smaller lenders, according to preliminary estimates released by the research firm ""Foresight Analytics"":http://www.foresightanalytics.com.
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Final figures for the third quarter 2010 are not due out until late November, but based on earnings reports and call report filings from many smaller banks, Foresight
Analytics offers its advance estimates of what we'll see in the final mortgage delinquency numbers for the July to September time period.
The company's analysts expect total delinquencies on first-lien single-family residential mortgages to rise slightly to 13.3 percent, up from 13.2 percent in the second quarter and 11.8 percent a year earlier.
Serious delinquencies are projected to increase by 0.2 percent, from 5.2 percent in the second quarter to 5.4
[COLUMN_BREAK]percent. During the third quarter of 2009, the serious delinquency rate was reported as 4.6 percent.
Matt Anderson, managing director of Foresight Analytics, a division of ""Trepp, LLC"":http://www.trepp.com, says the uptick in the delinquency rate comes after a decline in the second quarter, and amid renewed softness in home prices.
Despite the uptick in the third quarter, Anderson points out that delinquency rates are still below the first-quarter 2010 peak of 14 percent. Barring a return to recession, the Q1 rate will likely prove to be the apex in delinquencies, he says.
For commercial mortgages, Foresight Analytics projects the total delinquency rate to rise to 5.6 percent, up from 5.4 percent in Q2. Here too, the firm sees a reversal from the decline recorded by the second-quarter numbers.
The nonaccrual rate, or serious delinquency rate, among commercial mortgages is expected to reach 4 percent in Q3. This is a new peak for the nonaccrual rate, according to Foresight Analytics.
The company's analysts called the uptick in the delinquency rate for the commercial mortgage space ""especially notable,"" and warned that underwater loans combined with record amounts of maturing loans will be weighing on the market in coming quarters.
Anderson says if the tepid economic recovery manages to heat up, and real estate values increase, some of the pressure on the commercial mortgage sector will be relieved, but he expects distress to be an ongoing theme for an extended period.