The rate at which mortgages slip into delinquency and the foreclosure process has dropped to the lowest levels it has seen since 2008, according the Mortgage Bankers Association.
Nationwide, delinquency fell to 6.41% of all loans outstanding the association said after releasing its National Delinquency Survey. This was down 55 basis points from the previous quarter and 99 basis points below the same period last year, MBA added.
MBA calculates the the delinquency rate to include loans that are at least one payment past due but to exclude loans in the process of foreclosure.
But the percentage of loans in the foreclosure process at the end of the third quarter was 3.08%, also down 25 basis points from the second quarter and 99 basis points lower than one year ago. This was the lowest foreclosure inventory rate seen since 2008, MBA said.
“The degree to which the mortgage delinquency and foreclosure problem has changed over the last five years is perhaps best illustrated by the fact that last quarter New Jersey led the nation in the increase in the percentage of foreclosure actions filed, followed by Delaware, Maryland and Indiana, said Jay Brinkmann, MBA’s Chief Economist and SVP of Research and Education. “While Florida still leads the nation in the percentage of loans in foreclosure, that percentage is falling. In contrast, New York and New Jersey were the only two states that saw an increase in the percentages of loans in foreclosure.”
But Brinkmann cautioned that foreclosure rates are unlikely to reflect the reality of the solidly underwritten, post recession mortgages until the last of the loans made before the recession moves through the system.
“Also, while home prices have shown some considerable improvement, in only a small number of states are they back above their pre-2007 levels,” Brinkmann said. “This is noteworthy because roughly three-quarters of all seriously delinquent loans were originated in 2007 or earlier. So even if the economy continues to improve, those loans are more likely to proceed to foreclosure in the event of a divorce, illness or loss of a job because of lack of borrower equity. This will keep the foreclosure rates above historical norms for a few more years despite the strong credit standards of recent vintages.”