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Mortgage Delinquencies Slow as Foreclosure Starts Climb


The residential mortgage loan delinquency rate decreased to a seasonally adjusted 9.13 percent during the third quarter, the Mortgage Bankers Association reported today.

It fell from 9.85 percent in the second quarter and 9.64 percent a year ago, per the MBA’s National Delinquency Survey.

Meanwhile, the percentage of loans on which foreclosure was started increased to 1.34 percent, up from 1.11 percent a quarter earlier, but down from 1.42 percent a year ago.

The percentage of loans in the foreclosure process was 4.39 percent at the end of the quarter, down 18 basis points from the second quarter and eight basis points from a year ago.

The seriously delinquent rate, the percentage of loans 90 days or more past due or in the process of foreclosure, fell to 8.70 percent from 9.11 percent last quarter and 8.85 percent a year ago.

That pushed the combined percentage of loans in foreclosure or at least one payment past due to 13.78 percent, a 19 basis point decline from 13.97 percent last quarter.

Foreclosure Paperwork Issues Will Show Up Later

“The foreclosure paperwork issues announced by several large servicers in late September and early October are unlikely to have had a large impact on the third quarter numbers, but may well increase the foreclosure inventory numbers in the fourth quarter of 2010 and in early 2011,” said Michael Fratantoni, MBA’s Vice President of Research and Economics, in the release.

“The foreclosure inventory rate captures loans from the point of the foreclosure referral to exit from the foreclosure process, either through a cure (perhaps through a modification), a short sale or deed in lieu, or through a foreclosure sale.”

He noted that the loan servicers who halted foreclosure sales temporarily may show higher foreclosure inventory numbers in the fourth quarter and early next year.

And said any drop in foreclosure sales over the next few quarters may temporarily reduce the inventory of homes on the market, but they’re likely to come on the market in the medium term anyways, so it’ll only delay matters.

Prime fixed mortgages and FHA loans currently make up nearly 78 percent of loans outstanding, and accounted for more than half of the foreclosures started in the quarter, compared to 39 percent a year ago.

Meanwhile, the pool of subprime and adjustable-rate mortgage borrowers continues to shrink, either through refinance or default.

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