Powered by an improvement in the 90-day delinquency rate, overall quarterly delinquency and foreclosure rates were lower. But there was an uptick in early-stage late payments on home loans.
The 30-day rate of residential delinquency, including loans in the foreclosure inventory, ended the third quarter at 11.47 percent.
The past-due level was lower than the 11.85 percent second-quarter rate. It was also lower than the third-quarter 2011, when 30-day delinquency was 12.42 percent.
The findings were discussed in the National Delinquency Survey for the third-quarter 2012 released Thursday by the Mortgage Bankers Association. The latest report is available at a cost of $175 for non-MBA members and $75 for members.
Delinquency was based on 41,774,048 mortgage serviced as of Sept. 30. The prior quarter’s total loans were 42.5 million.
Excluding foreclosures, the seasonally adjusted 30-day rate was 7.40 percent, lower than 7.58 percent in the prior survey and also better than 7.99 percent in the third-quarter 2011.
The rate was highest in Mississippi at 13.10 percent. Georgia followed at 10.39 percent, then 10.18 percent in Louisiana. Thirty-day delinquency, excluding foreclosures, was under 10 percent in all other states. North Dakota was lowest at 3.10 percent.
On prime mortgages, delinquency was 4.66 percent, 22 BPS lower than the second-quarter rate. Subprime delinquency fell 26 BPS to 20.62 percent.
Late payments on mortgages insured by the Federal Housing Administration improved to 11.14 percent from 11.89 percent three months earlier and 12.09 percent a year earlier. VA-guaranteed loan delinquency fell to 6.34 percent from 6.65 percent and was 6.58 percent in the third-quarter 2012.
The 90-day-rate — which dropped to 2.96 percent as of Sept. 30 from 3.19 percent three months earlier — drove the overall increase, according to MBA Vice President of Research and Economics Mike Fratantoni.
“The 90 day delinquency rate is at its lowest level since 2008, and together with the decline in the percentage of loans in foreclosure, this indicates a significant drop in the shadow inventory of distressed loans-a real positive for the housing market,” Fratantoni said in an accompanying news release “The 30 day delinquency rate increased slightly, but remains close to the long-term average for this metric. Given the weak economic and job growth in third quarter, it is not surprising that this metric has not improved.”
Fratantoni explained that the 90-day rate can be expected to inflate if the foreclosure initiation process is delayed by states, with servicers forced to categorize the loans as 90-days delinquent instead of as in foreclosure.
MBA reported that the 90-day delinquency rate on FHA-insured loans was 4.37 percent, lower than 5.03 percent as of June 30 and 5.11 percent as of Sept. 30, 2011. Factoring in foreclosures, the rate goes from 9.26 percent at the end of the second quarter to 8.45 percent at the end of the third quarter.
While MBA’s survey reflects an improvement in FHA serious delinquency, FHA’s own operational results indicate that 90-day delinquency, based on the number of loans, increased to 9.58 percent as of the end of the third quarter from 9.44 percent as of the end of the second quarter. The disparity suggests that FHA performance has been worse at mega-banks versus the smaller companies surveyed by MBA.
“After large second quarter increases in the foreclosure starts and inventory rates for FHA loans due to the actions by some large servicers to re-start foreclosure processes that had been stalled, these rates fell in the third quarter but remain above where they were in the first quarter of 2012,” Fratantoni said.
The foreclosure inventory as of Sept. 30 on all loans was a non-seasonally adjusted 4.07 percent, 20 basis points better than the prior period. It was “the largest quarterly drop in the history of the survey.”
At the same point last year, the foreclosure rate was 4.43 percent.
Fratantoni said that foreclosure starts fell to the lowest level since 2007.
With a 13.04 percent foreclosure rate, Florida — where courts frequently rule in favor of delinquent borrowers based on technicalities — had the worst standing in this category. No other state had a foreclosure rate above 10 percent — though New Jersey’s 8.87 percent, Illinois’ 6.83 percent and New York’s 6.46 percent were high.
“The foreclosure rates in Maryland, Washington and New Jersey continue to be impacted by state efforts to slow the foreclosure process and by servicers who have to adjust their internal foreclosure processes based on state requirements,” Fratantoni said. “As a result, these states often fluctuate between large increases in foreclosure starts accompanied by large decreases in 90 day delinquencies in a single quarter, or large increases in 90 day delinquencies accompanied by large decreases in new foreclosures started.”
At 0.76 percent, Wyoming had the lowest foreclosure rate.
The foreclosure rate on prime mortgages was cut to 2.97 percent in the third quarter from 3.12 percent, while the foreclosure rate fell to 12.38 percent from 13.63 percent in the second quarter on subprime mortgages.
FHA loans had a foreclosure rate of 4.08 percent, 15 BPS less than as of June. The VA foreclosure rate fell 7 BPS to 2.21 percent.
