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Residential Mortgage Delinquencies and Foreclosures Down From Last Year, According to MBA National Delinquency Survey

March 18, 2005

Washington, D.C. – The fourth-quarter 2004 National Delinquency Survey (NDS), released 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 4.23 percent at the end of the fourth quarter, down 26 basis points from the fourth quarter of 2003 and down 18 basis points from the third quarter of 2004.

The percentage of loans in the foreclosure process was 1.12 percent at the end of the fourth quarter, a drop of 17 basis points from the previous year and a drop of 2 basis points from the third quarter of 2004. This rate was the lowest since the third quarter of 2000. The SA rate of loans entering the foreclosure process was 0.44 percent in the fourth quarter, down 1 basis point from the previous year and up 5 basis points from the third quarter of 2004.

"The U.S. economy grew at almost 4 percent in annualized real terms during the fourth quarter of 2004, adding 190,000 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 slow slightly, but 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 seasonally adjusted delinquency rates decreased for all loan types over the last year. Since the fourth quarter of 2003, the SA delinquency rate has decreased 15 basis points for prime loans (from 2.37 percent to 2.22 percent), 165 basis points for subprime loans (from 11.53 percent to 9.88 percent), 2 basis points for Federal Housing Administration (FHA) loans (from 12.23 percent to 12.21 percent) and 103 basis points for Department of Veterans Affairs (VA) loans (from 7.99 percent to 6.96 percent).

The SA delinquency rate for prime fixed-rate mortgage (FRM) loans is down 7 basis points (from 2.11 percent to 2.04 percent) and down 70 basis points for prime adjustable-rate mortgage (ARM) loans (from 2.81 percent to 2.11 percent) when compared with one year ago. Since last quarter, the SA delinquency rate for prime FRM loans is down 11 basis points, while the rate for prime ARM loans decreased 12 basis points.

The annual decrease in delinquency rates for subprime loans is even more dramatic: The SA delinquency rate for FRM loans is down 143 basis points (from 10.50 percent to 9.07 percent) and down 338 basis points for ARM loans (from 12.90 percent to 9.52 percent). Since last quarter, the delinquency rate for subprime FRM loans decreased 60 basis points, while the delinquency rate for subprime ARM loans decreased 70 basis points.

On a year-over-year basis, the foreclosure inventory percentage decreased 6 basis points for prime loans (from 0.55 percent to 0.49 percent), 165 basis points for subprime loans (from 5.63 percent to 3.98 percent), 26 basis points for FHA loans (from 2.93 percent to 2.67 percent) and 9 basis points for VA loans (from 1.59 percent to 1.50 percent).

Over the last year, the SA percentage of new foreclosures decreased 63 basis points for subprime loans (from 2.10 percent to 1.47 percent) and 1 basis point for VA loans (from 0.49 percent to 0.48 percent), while remaining unchanged for prime loans (0.20 percent) and increasing 14 basis points for FHA loans (from 0.91 percent to 1.05 percent)-a record high.

Since last quarter, the SA percentage of new foreclosures increased 2 basis points for prime loans, 11 basis points for subprime loans and 7 basis points for FHA loans, while decreasing 3 basis points for VA loans.

Source: Freddie Mac



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