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Mortgage delinquencies, foreclosures down in Q1.

The share of homeowners paying their mortgages late and the percentage of mortgages in foreclosure both dropped slightly in the first quarter of 2006, but mortgage market watchers should expect modest increases in delinquency and foreclosure rates in the coming quarters, according to the Mortgage Bankers Association.

MBA's quarterly National Delinquency Survey (NDS) noted that the percentage of loans in the foreclosure process was 0.98 percent at the end of the first quarter, a drop of 1 basis point from the fourth quarter of 2005, while the seasonally adjusted (SA) rate of loans entering the foreclosure process was 0.41 percent, 1 basis point lower than the previous quarter.

The SA delinquency rate for mortgage loans on one-to-four-unit residential properties stood at 4.41 percent at the end of the first quarter, down 29 basis points from the fourth quarter of 2005.

Compared with the first quarter of 2005, the percentage of loans in the foreclosure process was down 10 basis points and the percentage of loans entering the foreclosure process was down 1 basis point. The SA delinquency rate was up 10 basis points from one year ago.

"The economy grew at a brisk 5.3 percent pace in the first quarter of 2006, and labor markets were quite strong as well, with an average of 176,000 jobs added per month," said Doug Duncan, MBA's chief economist. "Within this context, the housing market was normalizing with a declining pace of new- and existing-home sales, and slowing rates of home-price appreciation."

In prior quarters, the survey indicated a number of factors putting upward pressure on delinquency rates, including the aging of the loan portfolio, increasing short-term interest rates and high energy prices, said Duncan.

"The strong economy and labor markets are offsetting positive factors that were particularly important in the first quarter," said Duncan. "Going forward, we expect these same factors will continue to be important, including the fact that the Federal Reserve might need to raise rates further to keep inflationary pressures contained."

Duncan noted that last summer's Hurricane Katrina continued to have an effect on the first-quarter numbers, as higher delinquency rates in Louisiana and Mississippi resulted from the destruction and dislocation caused by the storm.

Delinquency statistics for all loan types were lower once the hurricane's effects are eliminated from the first-quarter statistics. If the effects of Hurricane Katrina are removed from national statistics, the total delinquency rate decreases 39 basis points to 4.31 percent from 4.7 percent in the fourth quarter. This 39-basis-point decrease compares with a 29-basis-point decrease if the Hurricane Katrina impact is not removed.

"The non-Katrina percentages were calculated by using adjusted second-quarter 2005 numbers for Louisiana and Mississippi, instead of their first-quarter 2006 numbers," said Duncan. "The hurricane's impact has resulted in elevated delinquency rates, and may result in somewhat higher foreclosure rates for at least the next few quarters."

All adjustable-rate mortgage (ARM) loans and fixed-rate mortgage (FRM) loans had lower SA delinquency rates as compared with the previous quarter, except for the subprime ARMs, according to MBA.

Since the fourth quarter of 2005, the SA delinquency rate for prime ARMs decreased 24 basis points to 2.3 percent, the rate for prime FRM loans decreased 21 basis points to 2 percent, and the rate for the subprime FRM loans decreased 9 basis points to 9.61 percent, whereas the rate for subprime ARMs increased 41 basis points to 12.02 percent.

The SA delinquency rate decreased during the first quarter for all loan types except VA loans. The delinquency rate decreased 22 basis points for prime loans to 2.25 percent, 13 basis points for sub-prime loans to 11.5 percent and 95 basis points for FHA loans to 12.23 percent, while increasing 12 basis points for VA loans to 6.93 percent.

During the first quarter, the foreclosure inventory percentage decreased for prime loans and FHA loans, while the percentage increased for subprime and VA loans.

The foreclosure inventory rate decreased 2 basis points for prime loans to 0.40 percent and 16 basis points for FHA loans to 2.18 percent, while the rate increased 17 basis points for sub-prime loans to 3.5 percent and one basis point for VA loans to 1.14 percent.

By loan type, the SA percentage of new foreclosures decreased 2 basis points for prime loans to 0.16 percent and 8 basis points for FHA loans to 0.83 percent, while increasing 15 basis points for subprime loans to 1.62 percent and 5 basis points for VA loans to 0.39 percent.

The survey noted that the percentage of loans that were seriously delinquent during the first quarter--defined as the non-seasonally adjusted percentage of loans that are 90 days or more delinquent or in the process of foreclosure--was 1.93 percent, which is 15 basis points lower than for the fourth quarter of 2005.

Compared with the first quarter of 2005, prime FRM loans had a lower delinquency rate, whereas prime ARMs, subprime ARMs and subprime FRM loans had higher delinquency rates than last year.

During the first quarter, the SA delinquency percentage among prime FRM loans decreased 2 basis points, while the rate for prime ARMs increased 24 basis points, the rate for subprime ARMs increased 177 basis points and the rate for subprime FRM loans increased 51 basis points.

Relative to the first quarter of 2005, the SA delinquency rate increased for prime loans, subprime loans and FHA loans, while decreasing for VA loans. The delinquency rate increased 8 basis points for prime loans, 88 basis points for subprime loans and 50 basis points for FHA loans, whereas the delinquency rate fell 23 basis points for VA loans.

Compared with the first quarter of 2005, the percentage of loans in foreclosure decreased for all loan categories except subprime: 6 basis points for prime loans, 38 basis points for FHA loans and 24 basis points for VA loans. Among subprime loans, the percentage of loans in foreclosure increased 1 basis point over the year.

Over the last year, the SA percentage of new foreclosures decreased 2 basis points for prime loans, 3 basis points for FHA loans and 1 basis point for VA loans. Among subprime loans, the percentage of new foreclosures increased 8 basis points.

In the first quarter, the seriously delinquent percentage was 4 basis points higher than one year ago, said MBA.
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Publication:Mortgage Banking
Geographic Code:1USA
Date:Aug 1, 2006
Words:1071
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