The delinquency rate for mortgage loans on one-to-four-unit residential properties dropped to a seasonally adjusted rate of 8.22% of all loans outstanding as of the end of 4Q10. This amounts to a 91 basis point decrease from 3Q10, and a 125 basis point drop from a year ago, according to the Mortgage Bankers Association's (MBA) National Delinquency Survey.
The non-seasonally adjusted delinquency rate decreased 46 basis points to 8.93% this quarter from 9.39% last quarter.
"These latest delinquency numbers represent significant, across the board decreases in mortgage delinquency rates in the U.S," said Jay Brinkmann, MBA chief economist. "While delinquency and foreclosure rates are still well above historical norms, we have clearly turned the corner."
This is despite, he said, still high levels of unemployment, the economy did add over 1.2 million private sector jobs in 2010 and, after remaining stubbornly high during the first half of 2010, first-time claims for unemployment insurance fell in 2H10. Without a significant economic reversal, the delinquency picture should continue to improve this year, Brinkmann said.
The percentage of loans where foreclosure actions were started in 4Q10 was 1.27%, dropping seven basis points from the previous quarter and increasing seven basis points from a year ago. The delinquency rate includes loans that are at least a payment past due, although does not cover loans in the foreclosure process.
The percentage of loans in foreclosure at the end of 4Q10 was 4.63%, up 24 basis points from 3Q10 and up five basis points from one year ago.
The serious delinquency rate, which is the percentage of loans that are 90 days or more past due or in the foreclosure process, was 8.57%, a dip of 13 basis points from 3Q10, and a drop of 110 basis points from the 4Q09.
The combined percentage of loans in foreclosure or at least one payment past due was 13.56% on a non-seasonally adjusted basis, a 22 basis point dip from 13.78% last quarter.
Total delinquencies, which do not include loans in foreclosure, are currently at their lowest level since yearend 2008. Mortgages only one payment past due are now at the lowest level since the end of 2007, which was the very beginning of the recession.
Perhaps most notable is the fact that loans three payments or 90 days or more past due have dropped from an all-time high delinquency rate of 5.02% at the end of 1Q10 to 3.63% at the end of 4Q10, a drop of 139 basis points or almost 28% over the course of the year. Every state but two saw a drop in the 90-plus day delinquency rate and the two increases were negligible.
"While the foreclosure starts rate fell during the fourth quarter, the percentage of loans in foreclosure rose to equal the all-time high," Mike Fratantoni, MBA vice president for single family research said. "The foreclosure inventory rate captures loans from the point of the foreclosure referral to exit from the foreclosure process, either through a cure (perhaps through a modification), a short sale or deed in lieu, or through a foreclosure sale."
He added that the percentage of loans in foreclosure rose in 4Q10, mainly because of the foreclosure paperwork issues that were being addressed in September and October. These issues caused a temporary halt in foreclosure sales, specifically in those states with judicial foreclosure regimes, including New Jersey, Florida, and Illinois. With fewer loans exiting the foreclosure process via sales, the foreclosure inventory rate naturally rose despite fewer foreclosure starts meaning fewer loans entered the foreclosure process in 4Q10.
The share of loans in foreclosure in California and Florida together was 36.0%, Frantantoni said. This is equivalent to a drop from 37.3% in 3Q10, and 39.3% a year ago.
Over 24% of the loans in Florida are one payment or more past due or in the foreclosure process, which is the highest rate in the nation, followed by Nevada at over 22%, compared to an average of 13.6% for the nation, Frantantoni said. Only eleven states saw a rise in their foreclosure start rate with Maryland seeing the largest increase.
Change from 3Q10
On a seasonally adjusted basis, the overall delinquency rate dropped for all loan types. The seasonally adjusted delinquency rate stood at 4.51% for prime fixed loans, 11.2% for prime ARM loans, 21.26% for subprime fixed loans, 25.32% for subprime ARM loans, 12.26% for FHA loans, and 6.67% for VA loans.
The percent of loans in foreclosure, also known as the foreclosure inventory rate, rose 24 basis points to 4.63%, which ties the survey's record high that was last reached in the 1Q10. All loan types experienced a rise in the percent of loans in foreclosure.
The foreclosure inventory rate for prime fixed loans, which comprise the biggest portion of the survey (making up 63% of the loans), increased 22 basis points to 2.67%. This was the highest rate recorded for prime fixed in the history of the survey. The rate for prime ARM loans rose 17 basis points from last quarter to 10.22%. Subprime fixed loans saw an increase of 104 basis points to 9.92 percent, which is a new record high in the survey. The rate for subprime ARM loans increased 26 basis points to 22.04%, while the rate for FHA loans increased eight basis points to 3.30 percent and the rate for VA loans increased 21 basis points to 2.35%.
The foreclosure starts rate dropped nine basis points for prime fixed loans to 0.84%t, five basis points for subprime fixed loans to 2.73%, and 22 basis points for FHA loans to 1.02%. The foreclosure starts rate rose two basis points for prime ARM loans to 2.38%, 15 basis points for subprime ARM loans to 4.24%, and two basis points for VA loans to 0.88%.
Change from 4Q09
Given the challenges in interpreting the true seasonal effects in these data when comparing quarter to quarter changes, it is important to highlight the year over year changes of the non-seasonally adjusted results. The non-seasonally adjusted delinquency rate decreased for all loan types since the fourth quarter of 2009. The delinquency rate decreased 135 basis points for prime fixed loans, 124 basis points for prime ARM loans, 284 basis points for subprime fixed loans, 152 basis points for subprime ARM loans, 154 basis points for FHA loans, and 91 basis points for VA loans.
The non-seasonally adjusted foreclosure starts rate increased 21 basis points for prime fixed loans, 26 basis points for prime ARM loans, and seven basis points for VA loans, but is down 47 basis points for subprime ARM loans, 26 basis points for FHA loans, and remains unchanged for subprime fixed loans on a year over year basis.
Forty five states saw increases in the rate of foreclosure starts on a year over year basis, with the largest increases coming in Washington, Rhode Island and the District of Columbia. The biggest drops were in Florida, Connecticut, and Maryland.
Meanwhile, according to the MBA, Nevada and Arizona top the rankings for foreclosure starts and loans in foreclosure across most loan types.