Mortgage Delinquency Rates Take a Tumble – Are Signs of Stabilization Afoot?

Delinquencies on mortgage loans for properties ranging from one to four units have fallen, according to a statement from the Mortgage Bankers Association. The MBA’s National Delinquency Survey found that the rate fell to a seasonally adjusted rate of 9.47 percent of all loans outstanding as of the end of the fourth quarter 2009.

February 20, 2010
By Allison Landa, News Editor

Courtesy Flickr Creative Commons user NNECAPA

Delinquencies on mortgage loans for properties ranging from one to four units have fallen, according to a statement from the Mortgage Bankers Association.

The MBA’s National Delinquency Survey found that the rate fell to a seasonally adjusted rate of 9.47 percent of all loans outstanding as of the end of the fourth quarter 2009. The survey also found that the delinquency rate had fallen 17 basis points from the third quarter of last year.

However, the non-seasonally adjusted delinquency rate went in the opposite direction, inching up 50 basis points from 9.94 percent in the third quarter of last year to 10.44 percent in the current quarter.

MBA chief economist Jay Brinkmann said that the news portends better economic times.

“We are likely seeing the beginning of the end of the unprecedented wave of mortgage delinquencies and foreclosures that started with the subprime defaults in early 2007, continued with the meltdown of the California and Florida housing markets due to overbuilding and the weak loan underwriting that supported that overbuilding, and culminated with a recession that saw 8.5 million people lose their jobs,” Brinkmann said in the statement.

He added that a sizable drop in the 30-day delinquency rate is a “concrete sign that the end may be in sight”, since these delinquencies are historically a leading indicator of more serious delinquencies and eventual foreclosures. Thirty-day delinquencies fell by 16 basis points to 3.63 percent in the fourth quarter 2009 from 3.79 percent the previous quarter. Brinkmann said that only three times in the history of the MBA survey has the non-seasonally adjusted 30-day delinquency rate dropped between the third and fourth quarter.

“And never by this magnitude,” he added. “If the normal seasonal patterns hold for the first quarter, we should see an even steeper drop in the end of March data.”