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MBA: Q2 mortgage foreclosures down, delinquencies up.

THE SHARE OF HOMEOWNERS PAYING THEIR mortgages late rose ever so slightly while the percentage of mortgages in foreclosure dropped during the second quarter of 2005, according to the Mortgage Bankers Association.

MBA's quarterly National Delinquency Survey (NDS) noted the seasonally adjusted (SA) delinquency rate for mortgage loans on one-to-four-unit residential properties nudged upward 3 basis points from the first quarter to 4.34 percent at the end of the second quarter, but was down 22 basis points from a year ago.

Meanwhile, the percentage of loans in the foreclosure process was 1 percent by the end of the second quarter, down 8 basis points from the first quarter and a drop of 18 basis points from the second quarter of 2004. The SA rate of loans entering the foreclosure process was 0.39 percent in the second quarter, down 3 basis points from the previous quarter and down 1 basis point from a year earlier.

The good news is the U.S. economy grew at almost 3.3 percent in annualized real terms during the second quarter of 2005, adding an average 205,000 payroll jobs per month. Combined with the low-interest-rate environment, consumers improved their household finances, and the percentage of homeowners making their mortgage payments on time increased to nearly 96 percent, according to Doug Duncan, MBA's chief economist.

The bad news, predicted Duncan, is that the effects from Hurricane Katrina and now Hurricane Rita will be felt over the next few months, especially in storm-ravaged Louisiana, Mississippi, Alabama and Texas.

"The first effects of Katrina on delinquencies should be seen in the 30-to-59-days-delinquent category reported in the third quarter, with more complete impacts reflected in the fourth-quarter numbers," said Duncan. "In addition, higher energy costs may exacerbate delinquency rates starting in the fourth quarter."

The SA delinquencies for adjustable-rate mortgage (ARM) and fixed-rate mortgage (FRM) products were generally down from last year and last quarter. Over the year, the SA delinquency rate for prime ARM products was down 7 basis points to 2.19 percent, while the percentage among the prime FRM products decreased 9 basis points to 2.02 percent.

Since the second quarter of 2004, the SA delinquency rate for subprime ARM products has decreased 8 basis points to 10.04 percent, while the rate for subprime FRM products dropped 72 basis points to 9.06 percent.

Since the first quarter of 2005, the SA delinquency rate for prime ARM loans increased 13 basis points to 2.19 percent, whereas the rate for prime FRM products remained unchanged at 2.02 percent. Compared with the first quarter 2005, the SA delinquency percentage among subprime ARM products decreased 21 basis points to 10.04 percent, while the rate for subprime FRM loans decreased 4 basis points to 9.06 percent.

Since the second quarter of 2004, the SA delinquency rate decreased 20 basis points to 2.20 percent for prime loans, 14 basis points to 10.33 percent for subprime loans, 17 basis points to 12.37 percent for Federal Housing Administration (FHA) loans and 66 basis points to 6.91 percent for Department of Veterans Affairs (VA) loans.

Since the first quarter of 2005, the SA delinquency rate decreased 29 basis points for subprime loans and 25 basis points for VA loans, whereas the rate increased 3 basis points for prime loans and 64 basis points for FHA loans, said MBA.

The foreclosure inventory percentage decreased for all loan types over the year: down 7 basis points for prime loans to 0.42 percent, 111 basis points for subprime loans to 3.29 percent, 30 basis points for FHA loans to 2.29 percent and 20 basis points for VA loans to 1.25 percent.

In addition, the foreclosure inventory percentage declined from last quarter among all loan types: 4 basis points for prime loans, 20 basis points for subprime loans, 27 basis points for FHA loans and 13 basis points for VA loans.

Over the last year, the SA percentage of new foreclosures was down 1 basis point for prime loans to 0.18 percent, 19 basis points for FHA loans to 0.76 percent and 11 basis points for VA loans to 0.39 percent, while it increased 8 basis points to 1.26 percent among subprime loans.

Since the previous quarter, the percentage of new foreclosures decreased 28 basis points for subprime loans, 10 basis points for FHA loans and 1 basis point for VA loans, while remaining unchanged for prime loans at 0.18 percent.

The seriously delinquent rate--defined as the non-seasonally adjusted percentage of loans that are 90 days or more delinquent or in the process of foreclosure--was down from last year and from the previous quarter. This additional measure conforms with a number of standard definitions and is designed to account for intercompany differences when a loan enters the foreclosure process, according to MBA.

In the second quarter of 2005, the percentage of loans that were seriously delinquent was 1.83 percent--20 basis points lower than the second quarter of 2004 and 6 basis points lower than first-quarter 2005.

The second-quarter 2005 NDS results covered approximately 39.9 million loans--broken down as 29.7 million prime loans, 5.3 million subprime loans and 4.9 million government loans, said MBA.
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Title Annotation:National Delinquency Survey
Publication:Mortgage Banking
Geographic Code:1USA
Date:Oct 1, 2005
Words:882
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