The Mortgage Bankers Association (MBA) came out with its quarterly fourth quarter National Delinquency Survey results last Thursday.
According to the report, seasonally adjusted delinquencies rose to 5.82% from 5.59% in 3Q07, and are up 87 basis points from the end of the 2006. By loan type, the survey reported the delinquency rate on prime loans rose 12 basis points to 3.12%; 100 basis points to 16.31% for subprime loans; 13 basis points to 13.05% for Federal Housing Authority (FHA) loans; and fell nine basis points to 6.49% for Department of Veteran Affairs (VA) loans. Year over year, the MBA noted a 67 basis point gain for prime loans and 398 basis points for subprime. FHA and VA delinquencies are lower by 41bps and 33bps, respectively.
Serious delinquencies - loans that are more than 90 days or more delinquent - jumped 67 basis points to 3.62% (not seasonally adjusted) from the third quarter, and are up 141 basis points from the fourth quarter of 2006. The MBA reported that all loan types rose, with prime loans increasing 36 basis points to 1.67%; 306 basis points for subprime to 14.44%; 46 basis points for FHA to 6%; and 22 basis points to 2.83% for VA. Year over year, serious delinquencies were higher for all loan types.
The survey further breaks out serious delinquencies between ARM and fixed-rate loans. In the ARM category, seriously delinquent loans jumped 110 basis points to 4.22% for prime ARMs, and surged 480 basis points to 20.43% for subprime ARMs. Year over year, the respective increases are 277 basis points and 1,127 basis points. On the fixed side, prime loans rose 16 basis points to 0.99% and 157 basis points to 8.18% for subprime. Year over year, serious delinquencies on prime fixed are up 30 basis points and 214 basis points for subprime.
Turning to foreclosures, the MBA reported the percentage of loans that entered the foreclosure process during the quarter rose five basis point to 0.83%. Subprime loans, expectedly, had the largest increase. Meanwhile, loans that are in the foreclosure process as of the end of the 4Q07 increased 35 basis points to 2.04%, and is 85 basis points higher from the end of 2006. By loan type, prime loans in foreclosure was up 17 basis points to 0.96%; subprime loans jumped 176 basis points to 8.65%; FHA loans increased just 12 basis points to 2.34%; and VA loans rose just nine basis points to 1.12%.
In terms of delinquencies and foreclosures by state, Mississippi had the highest overall delinquency rate at 11.07%, followed by Michigan (8.97%) and Georgia (8.37%). Arizona's was reported at 5.45%, California's at 5.39%, Florida at 7.47%, and Nevada at 6.53%.
Based on foreclosure inventory, the states with the highest rates were: Ohio (3.88%), Indiana (3.53%), and Michigan (3.38%). These states are suffering job losses and out migrations that have contributed to the decrease in potential buyers for the existing supply, the MBA said. Arizona, California, Florida and Nevada experienced an overbuilding of new homes which has created a surplus that must be worked through. Foreclosure inventories for Arizona is 1.78, California 2.23%, Florida 3.22% and Nevada 3.02%.
The three states with the highest percentages were based on foreclosure starts,: Nevada (1.54%), Florida (1.46%), and Michigan (1.29%). California was 1.11% and Arizona 1.01%. The MBA noted that California and Florida continued to represent a disproportionate share of foreclosure starts. They said the two states represented 21% of all loans outstanding, but accounted for 30% of foreclosure starts in the U.S. These also accounted for 39% of all prime ARMs outstanding, but 47% of prime ARM foreclosure starts. In subprime, California and Florida accounted for 29% of the market, but 36% of the foreclosure starts.
"Of significance, however, is that the rate reset issue on adjustable rate mortgages is becoming less of an issue," MBA's Chief Economist Doug Duncan warned. "The six-month Libor rate, the index rate used for many subprime ARMs, has come down around 2.5 percentage points since last September, greatly reducing the payment shock of many ARM resets."
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