Delinquencies Increase, Foreclosure Starts Flat in Latest MBA National Delinquency Survey

WASHINGTON, D.C— The delinquency rate for mortgage loans on one-to-four-unit residential properties stood at 6.99 percent of all loans outstanding at the end of the third quarter of 2008, up 58 basis points from the second quarter of 2008, and up 140 basis points from one year ago on a seasonally adjusted basis, according to the Mortgage Bankers Association's (MBA) National Delinquency Survey.

The seasonally adjusted total delinquency rate continues to be the highest recorded in the MBA survey.

Jay Brinkmann, (top right photo) MBA's Chief Economist and Senior Vice President for Research and Economics said, "An initial look at the number of foreclosure starts would seem to indicate at least a leveling off of foreclosures.

" These numbers, however, are being influenced by several factors including various moratoria on foreclosure filings and by mortgage companies holding loans in the 90+ day bucket during the modification and workout process.

"Evidence of this can be seen in the large increase in loans 90 days or more past due but not yet in foreclosure. This rate jumped by 45 basis points, the highest increase in this category ever recorded in the MBA survey and far above the average 4 basis point jump we would expect to see.

" While 20 states showed declines in the rate of foreclosure starts between the second and third quarters, every state showed an increase in the 90 days or more delinquent category with the exception of Alaska and all of the increases were greater than what we would expect due to normal seasonal factors."

"As for what is driving the national numbers, it is still a case of product and location. Prime and subprime ARMs continue to have the highest share of foreclosures and California and Florida have about 54 percent and 41 percent of the prime and subprime ARM foreclosure starts respectively.

" Until those two markets turn around, they will continue to drive the national numbers," continued Brinkmann.

"While much of the mortgage problem in some states continues to be overbuilding, poor underwriting and incorrect credit pricing, fundamental economic factors are becoming more important.

"The 30-day delinquency rate is still lower than it was in the 2001 recession, but job losses are mounting. We have not gone into past recessions with the housing market as weak as it is now so it is likely that a much higher percentage of delinquencies caused by job losses will go to foreclosure than we have seen in the past.

"Until recently, it was job and population losses that were the problems in states like Michigan and Ohio, whereas the problems in California and Florida were a combination of too many houses, speculation and weak underwriting. Economic fundamentals are now deteriorating in California and Florida.

"Over the past year, Florida led the nation in job losses at 156,200, with California losing 101,300, as compared with Michigan job losses at 71,200 and Ohio at 17,300.

"In the last quarter we saw about 575,000 foreclosure actions started, compared with an estimated 580,000 in the second quarter and 535,000 in the first quarter.

"At this rate we are looking at finishing 2008 at about 2.2 million foreclosure actions started.

"Absent a recession, the 2009 number would likely have fallen by several hundred thousand but the effects of job losses and general economic deterioration make the 2009 outlook worse, particularly if mortgage problems become more widespread," Brinkmann said.

CONTACT: Carolyn Kemp, (202) 557-2727, ckemp@mortgagebankers.org