A record 1.35 million homes were in foreclosure in the third quarter, according to a ""Mortgage Bankers Association"":http://www.mbaa.org (MBA) study released today. The association's National Delinquency Survey puts the U.S. foreclosure rate at 2.97 percent, a 76 percent increase from a year ago.
The delinquency rate for mortgage loans on one-to-four-unit residential properties stood at 6.99 percent of all loans outstanding at the end of the third quarter of 2008, MBA said. The seasonally adjusted total delinquency rate continues to be the highest recorded in the history of the MBA survey. The increase in the overall delinquency rate was driven by increases in the number of seriously delinquent loans 90 or more days past due, primarily in California and Florida, MBA said. However, it's study showed that the 30-day delinquency percentage remains below levels seen as recently as 2002. The delinquency rate includes loans that are at least one payment past due but does not include loans somewhere in the process of foreclosure.
The percentage of loans on which foreclosure actions were started during the third quarter was 1.07 percent, actually down slightly from starts recorded in the second quarter. According to MBA's report, foreclosure start rates differed greatly by loan type. For prime loans, foreclosure starts on fixed-rate loans were 0.34 percent, unchanged from last quarter, while those of adjustable-rate mortgages (ARMs) fell to 1.77 percent. On subprime loans, fixed rate foreclosure starts increased to 2.23 percent and subprime ARM foreclosure starts decreased to 6.47 percent. FHA foreclosure starts were unchanged at 0.95 percent and VA foreclosure starts increased to 0.59 percent, all on a non-seasonally adjusted basis.
Nine states had rates of foreclosure starts that were above the national average: Nevada, Florida, Arizona, California, Michigan, Rhode Island, Illinois, Indiana, and Ohio. The remaining 41 states and the District of Columbia were below the national average. According to Jay Brinkmann, MBA's chief economist and SVP for research and economics, while much of the mortgage problem in some states lies with overbuilding, poor underwriting and incorrect credit pricing are becoming an increasing problem.
""As for what is driving the national numbers, it is still a case of product and location,"" Brinkmann said. ""Prime and subprime ARMs continue to have the highest share of foreclosures, and California and Florida have about 54 percent and 41 percent of the prime and subprime ARM foreclosure starts respectively. Until those two markets turn around, they will continue to drive the national numbers.
""An initial look at the number of foreclosure starts would seem to indicate at least a leveling off of foreclosures,"" Brinkmann continued. ""These numbers, however, are being influenced by several factors including various moratoria on foreclosure filings and by mortgage companies holding loans in the 90+ day bucket during the modification and workout process. Evidence of this can be seen in the large increase in loans 90 days or more past due but not yet in foreclosure,"" Brinkmann explained.
Brinkmann pointed out that while the 30-day delinquency rate is still lower than it was in the 2001 recession, job losses are mounting. ""We have not gone into past recessions with the housing market as weak as it is now so it is likely that a much higher percentage of delinquencies caused by job losses will go to foreclosure than we have seen in the past,"" Brinkmann said.
According to Brinkmann, at the current rate, we should close out 2008 with an estimated 2.2 million foreclosures. ""Absent a recession, the 2009 number would likely have fallen by several hundred thousand, but the effects of job losses and general economic deterioration make the 2009 outlook worse, particularly if mortgage problems become more widespread,"" Brinkmann warned.
To access MBA's statement on the findings of its National Delinquency Survey for Q3 2008, ""click here."":http://www.mortgagebankers.org/NewsandMedia/PressCenter/66626.htm