The percentage of U.S. residential mortgage delinquencies and new foreclosures started in the fourth quarter of 2011 declined modestly from the previous quarter, as well as from the levels a year ago. At the same time, the overall percent of mortgages in foreclosure remained elevated but nearly flat from the third quarter, according to the Mortgage Bankers Association’s (MBA’s) National Delinquency Survey released on Feb. 16, 2012.
Total delinquencies, including loans 30 days or more past due, but excluding foreclosures and real estate owned (REO) homes, are currently at their lowest point in the last three years and have been gradually falling from their 10.1% peak in the first quarter of 2010. We believe decreasing delinquencies represent a positive trend for the underlying collateral performance of U.S. residential mortgage-backed securities (RMBS) and the housing market’s recovery. Combined with lower foreclosure starts, the declines suggest we could see a slow but gradual improvement in the foreclosure inventory in the upcoming quarters. However, the still elevated foreclosures (which include approx. 1.9 million homes) and distressed home sales signal that home prices will remain under pressure in the upcoming months as those homes are liquidated.
· The total delinquency rate for mortgage loans on one-to-four-unit residential properties declined to a seasonally adjusted (SA) rate of 7.58% of all loans outstanding at the end of fourth-quarter 2011, down from 7.99% in the third quarter and a decrease from 8.25% a year ago. However, on a nonseasonally adjusted (NSA) rate, total delinquencies decreased five basis points (bps) to 8.15% this quarter.
· Total delinquencies are near their late 2008 levels and remain above the 4.8% pre-recession average. However, they are still significantly below the 10.1% peak reached in first-quarter 2010. Mortgage loans with only one payment past due (loans 30 days delinquent) or short-term delinquencies are also improving.
· The serious delinquency rate (loans 90 days or more delinquent or in foreclosures) fell 16 bps to 7.73% in the fourth quarter, after increasing 4 bps in the previous quarter. This current level is the lowest we’ve seen since March 2009 and translates to roughly 3.32 million seriously delinquent mortgage loans based on MBA’s mortgage universe for this survey as of the fourth quarter.
· During the fourth quarter, the percentage of loans in the foreclosure process–also known as the foreclosure inventory–remained nearly unchanged at 4.38% from the third quarter’s 4.43% but was lower than the 4.64% we saw a year ago. On average, 0.95% of all U.S. mortgages were in foreclosure during the pre-recession period.
· In addition, the fourth-quarter foreclosure starts rate declined 9 bps to 0.99% from 1.08% in the previous quarter but remained near its lowest level since early 2009. Foreclosure starts are still well above the pre-recession average of roughly 0.31%.
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