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Delinquencies, foreclosures increase during fourth quarter.

The share of homeowners paying their mortgages late as well as the share of homeowners in the foreclosure process both saw an increase during the fourth quarter of 2006, according to MBA.

MBA's quarterly National Delinquency Survey (NDS) noted that the delinquency rate for mortgage loans on one-to-four-unit residential properties stood at 4.95 percent of all loans outstanding in the fourth quarter of 2006--the most recent numbers available--on a seasonally adjusted basis, up 28 basis points from the third quarter and up 25 basis points from one year earlier.

The increase was driven by increases in delinquencies for all major loan types during the fourth quarter, with increases in delinquency and foreclosure rates noticeably larger for sub-prime loans, explained MBA Chief Economist Doug Duncan.

"Subprime borrowers are more likely to be susceptible to the cumulative increases in interest rates that we have experienced and the resultant nationwide slowing of home-price appreciation, including outright declines in some markets," says Duncan. "Given our macroeconomic forecast of below-trend economic growth and a slowly recovering housing market, we would expect delinquency and foreclosure rates to level off as the housing market regains its footing toward the end of 2007."

The percentage of loans in the foreclosure process was 1.19 percent of all loans outstanding at the end of the fourth quarter, an increase of 14 basis points from the third quarter of 2006, while the seasonally adjusted rate of loans entering the foreclosure process was 0.54 percent--8 basis points higher than the previous quarter and a record high.

Compared with the fourth quarter of 2005, the percentage of loans in the foreclosure process was up 20 basis points while the percentage of loans entering the foreclosure process was up 12 basis points.

"As we had expected, in the fourth quarter delinquency rates again increased across the board. Increases in delinquency and foreclosure rates were noticeably larger for subprime loans. The significant increases in delinquency rates has in some cases led to unexpected increases in credit losses and the failures of some sub-prime specialist firms," said Duncan. "As we have noted before, and as recent events have made clear, market discipline in this industry is swift, can be severe and is more effective at changing lending practices than any potential changes in regulation."

The seasonally adjusted delinquency rate increased during the fourth quarter for all loan types. The delinquency rate increased 13 basis points for prime loans to 2.57 percent, 77 basis points for subprime loans to 13.33 percent, 66 basis points for FHA loans to 13.46 percent and 24 basis points for Department of Veterans Affairs (VA) loans to 6.82 percent.

All ARM and FRM loans had higher seasonally adjusted delinquency rates compared with the third quarter of 2006. Delinquency rates in the fourth quarter increased 33 basis points for prime ARM loans to 3.39 percent, and increased 122 basis points for subprime ARMs to 14.44 percent.

The seasonally adjusted delinquency rate for prime fixed loans increased 17 basis points to 2.27 percent, while the rate increased 50 basis points for subprime fixed loans to 10.09 percent, said MBA.

During the fourth quarter of 2006, the foreclosure inventory rate increased for prime loans and subprime loans, and decreased for FHA loans and VA loans. The foreclosure inventory rate increased 6 basis points for prime loans to 0.5 percent and 67 basis points for subprime loans to 4.53 percent.

The foreclosure inventory rate decreased 9 basis points for FHA loans to 2.19 percent and 11 basis points for VA loans to 1.01 percent, said MBA.

By loan type, the foreclosure start rate increased 5 basis points for prime loans to 0.24 percent, 18 basis points for subprime loans to 2 percent, 14 basis points for FHA loans to 0.93 percent, and 2 basis points for VA loans to 0.34 percent.

In the fourth quarter of 2006, the percent of loans that were seriously delinquent--which is defined as the non-seasonally adjusted (NSA) percentage of loans that are 90 days or more delinquent or in the process of foreclosure--was 2.21 percent, 21 basis points higher than for the third quarter of 2006.

Since the fourth quarter of 2005, the seasonally adjusted delinquency rate increased for all loan types. The delinquency rate increased 10 basis points for prime loans, 170 basis points for subprime loans, 28 basis points for FHA loans and 1 basis point for VA loans.

Compared with the fourth quarter of 2005, the foreclosure inventory rate increased 8 basis points for prime loans and 120 basis points for subprime loans. The rate decreased 15 basis points for FHA loans and 12 basis points for VA loans, said MBA.
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Title Annotation:Briefing Book
Comment:Delinquencies, foreclosures increase during fourth quarter.(Briefing Book)
Publication:Mortgage Banking
Geographic Code:1USA
Date:May 1, 2007
Words:792
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