Residential Mortgage Delinquencies and Foreclosures Down, According to MBA National Delinquency Survey
June 21, 2005
WASHINGTON, D.C. — The first-quarter 2005 National Delinquency Survey (NDS), released today by the Mortgage Bankers Association (MBA), shows that the seasonally adjusted (SA) delinquency rate for mortgage loans on one-to-four-unit residential properties stood at 4.31 percent at the end of the first quarter, down 15 basis points from the first quarter of 2004 and down 7 basis points from the fourth quarter of 2004. This quarter’s NDS results cover approximately 39.4 million loans (29.4 million prime loans, 5.1 million subprime loans, and 5.0 million government loans).
The percentage of loans in the foreclosure process was 1.08 percent at the end of the first quarter, a drop of 21 basis points from the previous year and a drop of 7 basis points from the fourth quarter of 2004. The SA rate of loans entering the foreclosure process was 0.42 percent in the first quarter, down 5 basis points from the previous year and down 4 basis points from the fourth quarter of 2004.
“The U.S. economy grew at almost 3.5 percent in annualized real terms during the first quarter of 2005, adding 180,000 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. Economic growth is expected to remain strong over the next couple of years. Likewise, job growth should be steady in the presence of modest interest rate rises. These expectations likely mean we will continue to see moderate declines in delinquencies for the next few quarters.”
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 22 basis points (from 2.28 percent to 2.06 percent), while the percentage among prime FRM products increased two basis points (from 2.00 percent to 2.02 percent). Since the first quarter of 2004, the SA delinquency rate for subprime ARM products has decreased 74 basis points (from 10.99 percent to 10.25 percent), while the rate for subprime FRM products dropped 153 basis points (from 10.63 percent to 9.10 percent).
Since last quarter, the SA delinquency rate for prime ARM loans has decreased five basis points (from 2.11 percent to 2.06 percent), whereas the rate for prime FRM products declined two basis points (from 2.04 percent to 2.02 percent). Compared with fourth quarter of 2004, the SA delinquency percentage among subprime ARM products increased 42 basis points (from 9.83 percent to 10.25 percent), while the rate for subprime FRM loans decreased 62 basis points (from 9.72 percent to 9.10 percent).
Since the first quarter of 2004, the SA delinquency rate has decreased 9 basis points for prime loans (from 2.26 percent to 2.17 percent), 104 basis points for subprime loans (from 11.66 percent to 10.62 percent), and 23 basis points for VA loans (from 7.39 percent to 7.16 percent), while increasing 3 basis points among FHA loans (from 11.70 percent to 11.73 percent). Since fourth quarter of 2004, the SA delinquency rate decreased 5 basis points for prime loans and 50 basis points for FHA loans, whereas the rate increased 29 basis points for subprime loans and 19 basis points for VA loans .
The foreclosure inventory percentage decreased for all loan types over the year: 7 basis points for prime loans (from 0.53 percent to 0.46 percent), 137 basis points for subprime loans (from 4.86 percent to 3.49 percent), 22 basis points for FHA loans (from 2.78 percent to 2.56 percent) and 15 basis points for VA loans (from 1.53 percent to 1.38 percent). In addition, the foreclosure inventory percentage declined from last quarter among all loan types: three basis points for prime loans, 33 basis points for subprime loans, 11 basis points for FHA loans, and 12 basis points for VA loans.
Over the last year, the SA percentage of new foreclosures fell two basis points for prime loans (from 0.20 percent to 0.18 percent), 44 basis points for subprime loans (from 1.98 percent to 1.54 percent), 7 basis points for FHA loans (from 0.93 percent to 0.86 percent), and 8 basis points for VA loans (from 0.48 percent to 0.40 percent). Since the last quarter, the percent of new foreclosures decreased 2 basis points for prime loans, 20 basis points for FHA loans, and 8 basis points for VA loans, while increasing 7 basis points for subprime loans.
For the first time, the MBA is presenting 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. 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 first quarter of 2005, the percent of loans that were seriously delinquent was 1.89 percent, 18 basis points lower than fourth quarter of 2004 and 25 basis points lower than first quarter 2004.
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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, with non-seasonally adjusted numbers, the delinquency rate for subprime ARM decreased 172 basis points from 10.70 percent to 8.98 percent, which compares with a 42 basis point increase based on the seasonally adjusted figures.
Source: The Mortgage Bankers Association