Residential Mortgage Delinquencies and Foreclosure Inventory Down From Last Year, According to MBA National Delinquency Survey
September 9, 2004
Washington, D.C. – The second-quarter 2004 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 4.43 percent at the end of the second quarter, down 54 basis points from the same quarter last year and up 10 basis points from the first quarter.
The inventory of loans in foreclosure was 1.16 percent at the end of the second quarter, a drop of 19 basis points from the same quarter last year and a drop of 11 basis points from the first quarter of this year. This rate was the lowest level since the end of 2000. The SA rate of loans entering the foreclosure process was 0.39 percent in the second quarter, up 3 basis points from the same quarter last year but down 7 basis points from the first quarter.
"The percentage of serious delinquencies, which is defined as loans 90 days or more delinquent or in the foreclosure process, continues to improve. While the total of overall delinquencies increased 10 basis points, this was almost entirely due to a rise in the number of loans that are 30 to 59 days past due. We usually see a large seasonal drop in these short-term delinquencies in the first quarter, followed by a return to more normal levels in the second quarter. We saw similar upward blips of 13 and 12 basis points in the second quarters of 2002 and 2003, respectively, which were followed by declines in the third quarters," said Douglas Duncan, MBA's chief economist and senior vice president.
"Based on the continued expansion of the economy and strong home-price growth in many regions, it is unlikely this small upward blip represents a reversal of the downward trend in delinquencies we have seen since the middle of 2001," said Duncan.
Among the other important highlights of the survey are the following:
- On a seasonally adjusted basis, subprime delinquencies fell 295 basis points between the second quarters of 2003 and 2004 to 10.04 percent, and by 115 basis points since the first quarter of 2004. The inventory of subprime loans in foreclosure fell to 4.61 percent in the second quarter, a 220 basis point drop on a year-to-year basis and a 44 basis point drop from the first quarter.
- After a sizable drop last quarter, SA delinquencies on Federal Housing Administration (FHA) loans increased by 84 basis points to 12.52 percent between the first and second quarters of 2004, but finished 7 basis points below the record level of 12.59 percent set in the second quarter of 2003. Once again, FHA delinquencies were above subprime delinquencies in every category except foreclosures.
- The performance of prime fixed-rate mortgages deteriorated slightly relative to adjustable-rate mortgages (ARMs). While the SA total delinquency rate for prime fixed-rate mortgages increased 11 basis points to 2.11 percent between the first and second quarters of 2004, the prime ARM delinquency rate declined 2 basis points to 2.26 percent. The subprime fixed-rate delinquency rate fell 154 basis points during the second quarter to 9.09 percent, while the subprime ARM delinquency rate declined 114 basis points to 9.85 percent during the same period.
Among prime loans, the SA delinquency rate was 2.40 percent in the second quarter, a decline of 20 basis points from last year but an increase of 14 basis points from the first quarter. The inventory of prime loans in foreclosure was 0.49 percent in the second quarter, down 4 basis points from 0.53 percent in the second quarter of 2003 and also the first quarter of 2004.
For Department of Veterans Affairs (VA) loans, the SA delinquency rate was 7.55 percent in the second quarter, down from 8.24 percent one year ago but up from 7.37 percent the previous quarter. The percentage of loans in the foreclosure process in the second quarter was 1.45 percent, down 4 basis points from one year ago and down 8 basis points from the first quarter.