Thursday, November 19, 2009

Delinquencies and Foreclosures Rise on Prime Mortgages

The MBA released its National Delinquency Survey today and the findings were not pretty. The delinquency rate for mortgage loans on one-to-four unit residential properties rose to a seasonably adjusted rate of 9.64% of all loans outstanding as of the end of the third quarter of 2009, up 40 basis points from the second quarter and 2.65% from a year ago. The combined percentage of loans in foreclosure or at least one payment past due was 14.41%, the highest ever recorded in the MBA delinquency survey.

While subprime began the mortgage mess we're in, the latest increases in delinquencies were driven by prime and FHA loans. 33% of foreclosures started in the third quarter were on prime fixed-rate loans and those loans were 44% of the quarterly increase in foreclosures. Option ARMs are lumped together with prime adjustable loans, which helps explain why the foreclosure rate on those loans exceeded the rate for subprime fixed-rate loans for the first. Both fixed and adjustable subprime loans saw decreases in foreclosures.

The foreclosure rate on FHA loans also increased, despite the large increase in the number of FHA-insured loans outstanding. The foreclosure rate was 1.31% for FHA loans.

The MBA's Chief Economist, Jay Brinkman, maintains that: "The outlook is that delinquency rates and foreclosure rates will continue to worsen before they improve," with a persistently high unemployment rate being the main culprit. He adds that "Job losses continue to increase and drive up delinquencies and foreclosures because mortgages are paid with paychecks, not percentage point increases in GDP." He's pretty eloquent for a mortgage banker eh?

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