Residential Mortgage Foreclosures Down and Delinquencies Up Slightly, According to MBA National Delinquency Survey
|September 15, 2005|
Washington, D.C. — The second-quarter 2005 National Delinquency Survey (NDS), released today by the Mortgage Bankers Association (MBA), shows that the percentage of loans in the foreclosure process was 1.00 percent at the end of the second quarter, a drop of 18 basis points from the previous year and a drop of 8 basis points from the first quarter of 2005. The seasonally adjusted (SA) rate of loans entering the foreclosure process was 0.39 percent in the second quarter, down 1 basis point from the previous year and down 3 basis points from the first quarter of 2005.
The SA delinquency rate for mortgage loans on one-to-four-unit residential properties stood at 4.34 percent at the end of the second quarter, down 22 basis points from the second quarter of 2004 but up 3 basis points from the first quarter of 2005. This quarter’s NDS results cover approximately 39.9 million loans (29.7 million prime loans, 5.3 million subprime loans, and 4.9 million government loans).
“The U.S. economy grew at almost 3.3 percent in annualized real terms during the second quarter of 2005, adding 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,” said Doug Duncan, MBA’s chief economist and senior vice president. “We expect an uptick in delinquency rates over the next few quarters in the states impacted by Hurricane Katrina, especially Louisiana and Mississippi. 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. In addition, higher energy costs may exacerbate delinquency rates starting in the fourth quarter“.
The SA delinquencies for adjustable rate (ARM) and fixed rate (FRM) products are generally down from last year and last quarter. Over the year, the SA delinquency rate for prime ARM products is down 7 basis points (from 2.26 percent to 2.19 percent), while the percentage among prime FRM products decreased 9 basis points (from 2.11 percent to 2.02 percent). Since the second quarter of 2004, the SA delinquency rate for subprime ARM products has decreased 8 basis points (from 10.12 percent to 10.04 percent), while the rate for subprime FRM products dropped 72 basis points (from 9.78 percent to 9.06 percent).
Since last quarter, the SA delinquency rate for prime ARM loans increased 13 basis points (from 2.06 percent to 2.19 percent), whereas the rate for prime FRM products remained unchanged at 2.02 percent. Compared with first quarter of 2005, the SA delinquency percentage among subprime ARM products decreased 21 basis points (from 10.25 percent to 10.04 percent), while the rate for subprime FRM loans decreased 4 basis points (from 9.10 percent to 9.06 percent).
Since the second quarter of 2004, the SA delinquency rate decreased 20 basis points for prime loans (from 2.40 percent to 2.20 percent), 14 basis points for subprime loans (from 10.47 percent to 10.33 percent), 17 basis points for FHA loans (from 12.54 percent to 12.37 percent) and 66 basis points for VA loans (from 7.57 percent to 6.91 percent). Since 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.
The foreclosure inventory percentage decreased for all loan types over the year: 7 basis points for prime loans (from 0.49 percent to 0.42 percent), 111 basis points for subprime loans (from 4.40 percent to 3.29 percent), 30 basis points for FHA loans (from 2.59 percent to 2.29 percent) and 20 basis points for VA loans (from 1.45 percent 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 (from 0.19 percent to 0.18 percent), 19 basis points for FHA loans (from 0.95 percent to 0.76 percent), and 11 basis points for VA loans (from 0.50 percent to 0.39 percent), while increasing 8 basis points among subprime loans (from 1.18 percent to 1.26 percent). Since the last quarter, the percent 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 (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 last quarter. This additional measure conforms with a number of standard definitions and is designed to account for inter-company differences on when a loan enters the foreclosure process. In the second quarter of 2005, the percent of loans that were seriously delinquent was 1.83 percent, 20 basis points lower than second quarter of 2004 and 6 basis points lower than first quarter 2005.
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Note: One issue still apparent in the subprime data is the lack of sufficient historical data for the calculation of seasonal adjustment factors. Seasonal adjustment factors are used to remove the seasonality in the numbers, revealing true quarter-to-quarter trends. For example, the unadjusted delinquency rate for subprime loans increased 93 basis points (from 9.48 percent to 10.41 percent), while on a seasonally-adjusted basis the delinquency rate has decreased 29 basis points (from 10.62 percent to 10.33 percent).