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Delinquencies Decrease in Latest MBA National Delinquency Survey

June 15, 2007

The delinquency rate for mortgage loans on one-to-four-unit residential properties stood at 4.84 percent of all loans outstanding in the first quarter of 2007 on a seasonally adjusted (SA) basis, down 11 basis points from the fourth quarter of 2006, and up 43 basis points from one year ago, according to MBA's National Delinquency Survey. The delinquency rate does not include loans in the process of foreclosure. The percentage of loans in the foreclosure process was 1.28 percent of all loans outstanding at the end of the first quarter, an increase of nine basis points from the fourth quarter of 2006 and 30 basis points from one year ago.

The rate of loans entering the foreclosure process was 0.58 percent on a seasonally adjusted basis, four basis points higher than the previous quarter and up 17 basis points from one year ago.

"The rate of delinquencies is being driven by what is taking place in seven states. The percentage of loans in foreclosure would be well below the average of the last ten years were it not for Ohio, Michigan and Indiana, and the rate of foreclosures started nationwide would have fallen were it not for the big jumps in California, Florida, Nevada and Arizona. Those states have special circumstances that do not reflect what is happening in the rest of the country," said Doug Duncan, MBA's Chief Economist and Senior Vice President of Research and Business Development.

Regarding the situation in California, Florida, Nevada and Arizona, Duncan said:

  • "While foreclosure starts increased slightly from last quarter, thus setting another record, most of the increase was due to only four states, California, Florida , Nevada, and Arizona. Without these four states, foreclosure starts would have declined. 24 states saw a decline in foreclosure starts, while the rest of the states saw negligible increases, with the largest increases coming in Nevada (19 basis points), Florida (13 basis points), California (12 basis points), Maine (8 basis points), and Arizona (7 basis points)."
  • "Information provided to the MBA from a variety of sources indicates that the foreclosures in Florida, Nevada, California, and Arizona are heavily influenced by speculators who are walking away from properties now that home prices have started to fall in areas of those states and they face resets in the adjustable-rate mortgages they took out for these homes. In addition, speculators in Florida are also facing much higher insurance bills."
  • "Much attention has been paid to the performance of the subprime ARM market. The rate of foreclosures started on subprime ARMs jumped from 2.7 percent to 3.23 percent. However, the states mainly responsible for that increase were California, Florida, Nevada and Arizona. Twenty-six states had decreases in the foreclosure rates on subprime ARMs, and the national foreclosure rate on subprime ARMs would have slightly declined were it not for the increases in those four states."

Regarding the situation in Ohio, Michigan and Indiana, Duncan said:

  • "While Ohio, Indiana and Michigan account for 8.7 percent of the mortgage loans in the country, those three states account for 19.9 percent of the nation's loans in foreclosure and 15.0% of all of the foreclosures started in the country during the first quarter. Without these three states, the percent of loans in foreclosure in the US would be below the average over the last 10 years, 1.12 percent versus an average of 1.19 percent."
  • "The level of foreclosures and foreclosure starts for those three states exceed what occurred in Texas during the oil bust of the mid-1980s, and Ohio is the highest ever seen in the MBA survey for a large state."
  • "The problems in these three states extend across all loan types. For example the percent of subprime ARM loans seriously delinquent in Ohio, those loans 90 days or more past due or in foreclosure, is 19.9 percent, twice the national average of 10.1 percent. However, for prime fixed-rate loans the Ohio seriously delinquent rate of 1.9 percent is almost three times the national average."
  • All three states have suffered large declines in manufacturing employment. While we have seen some pickup in service sector employment, that employment is not often in the areas where job losses occurred and the wages are often lower. For example, while we have seen increases in employment in places like Cincinnati, Columbus, Ann Arbor, and Indianapolis, we have seen job losses in Detroit, Flint, Cleveland, Dayton and Muncie.

Change from last quarter (fourth quarter of 2006)

The delinquency rate increased one basis point for prime loans (from 2.57 percent to 2.58 percent) and 44 basis points for subprime loans (from 13.33 percent to 13.77 percent). The delinquency rate decreased 131 basis points for FHA loans (from 13.46 percent to 12.15 percent) and 33 basis points for VA loans (from 6.82 percent to 6.49 percent).

Relative to the previous quarter, delinquency rates increased 30 basis points for prime ARM loans (from 3.39 percent to 3.69 percent) and increased 131 basis points for subprime ARMs (from 14.44 percent to 15.75 percent). The delinquency rate for prime fixed loans decreased eight basis points (from 2.27 to 2.19 percent), while the rate increased 16 basis points for subprime fixed loans (from 10.09 percent to 10.25 percent).

The foreclosure inventory rate increased for most loan types. The foreclosure inventory rate increased four basis points for prime loans (from 0.5 percent to 0.54 percent), 57 basis points for subprime loans (from 4.53 percent to 5.1 percent), and four basis points for VA loans (from 1.01 to 1.05). The foreclosure inventory rate remained unchanged for FHA loans (2.19 percent).

The new foreclosure rate increased one basis point for prime loans (from 0.24 percent to 0.25 percent), 43 basis points for subprime loans (from 2 percent to 2.43 percent), and seven basis points for VA loans (from 0.34 percent to 0.41 percent). The new foreclosure rate decreased three basis points for FHA loans (from 0.93 percent to 0.9 percent).

In the first quarter of 2007, the percent of loans that were seriously delinquent, which is defined as the NSA percentage of loans that are 90 days or more delinquent or in the process of foreclosure, was 2.23 percent, two basis points higher than for the fourth quarter of 2006. This measure is designed to account for inter-company differences on when a loan enters the foreclosure process.

Change from last year (first quarter of 2006)

Compared with the first quarter of 2006, the SA delinquency rate increased for prime and subprime loans and decreased for FHA and VA loans. The delinquency rate increased 33 basis points for prime loans and 227 basis points for subprime loans, while decreasing eight basis points for FHA loans and 44 basis points for VA loans.

The foreclosure inventory rate increased 14 basis points for prime loans, 160 basis points for subprime loans, and one basis point for FHA loans. The rate decreased nine basis points for VA loans.

The SA rate of new foreclosures increased nine basis point for prime loans, 81 basis points for subprime loans, seven basis points for FHA loans, and two basis points for VA loans

Source: MBA



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