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13.97 Percent of Mortgages Late or in Foreclosure


Nearly 14 percent of mortgage loans on one-to-four unit properties were at least one month delinquent or in some stage of foreclosure at the end of the second quarter, according to the Mortgage Bankers Association.

That’s actually down from 14.01 percent last quarter, but could be deceiving given the large number of loan modifications in process (and they’re horrible re-default rates) and various mortgage lender backlogs.

The delinquency rate (loans that are at least one mortgage payment behind) dropped to a seasonally adjusted rate of 9.85 percent, down from 10.06 percent a quarter earlier, but up from 9.24 percent a year ago.

The seriously delinquency rate, loans that are 90 days or more past due or in the process of foreclosure, was 9.11 percent, down from 9.54 percent in the first quarter, but well above the 7.97 percent rate seen in the second quarter of 2009.

Meanwhile, the foreclosure rate was 4.57 percent, down from 4.63 percent in the first quarter, but up from 4.30 percent last year.

The percentage of loans on which foreclosure actions were started during the second quarter was 1.11 percent, down from 1.23 percent last quarter and 1.36 percent a year ago.

“These latest delinquency numbers contain a mixture of somewhat good news and somewhat bad news,” said Jay Brinkmann, MBA’s chief economist, in the report.

“The good news is that foreclosure starts are down and the inventory of homes anywhere in the process of foreclosure fell for the first time since 2006 and had the largest drop since 2005.  Loans 90 days or more past due, the largest share of delinquent loans, also fell.  The fact that both the 90+ delinquency rate fell and the foreclosure start rate fell means that a significant number of these seriously delinquent loans have been successfully modified and reclassified as performing, current loans.”

However, the rate of short-term delinquencies has increased and that may drive a new batch of foreclosures – the percent of loans one payment behind, which had peaked at 3.77 percent in the first quarter of 2009, climbed to 3.51 percent during the second quarter, up from 3.31 percent at the end of 2009.

Brinkmann attributed the increase to a rise in unemployment claims, which fell through most of 2009 before plateauing and eventually rising again recently.

“Ultimately the housing story, whether it is delinquencies, homes sales or housing starts, is an employment story,” he added.  “Only when we see a consistent increase in employment will we see an increase in sales and starts, and a sustained improvement in the delinquency numbers.”

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