Foreclosure Measures at Multi-Year Lows; Some States Still Increasing

Both mortgage delinquency rates and the foreclosure inventory rate hit their lowest points in five years at the end of the fourth quarter of 2013. The National Delinquency Survey conducted by the Mortgage Bankers Association (MBA) showed a two basis point decline during the quarter in the rate of mortgages that are at least one payment past due and a 22 basis point drop in the number of mortgages in some stage of the foreclosure process.

The delinquency rate for one-to-four family loans, which does not include loans in foreclosure, was at a seasonally adjusted rate of 6.39 percent at the end of the fourth quarter compared to 6.41 percent in the third.  This was a drop of 70 basis points from the fourth quarter of 2012 and the lowest level since the first quarter of 2008. 

The foreclosure inventory was at 2.86 percent, the lowest since 2008.  This was a -22 basis point change from the third quarter and down 88 basis points from a year earlier.

Foreclosures were initiated on 0.54 percent of mortgages in the quarter.  This rate was down 7 basis points quarter-over-quarter and was the lowest rate for foreclosure starts since 2006.

Serious delinquencies, those over 90 days or in foreclosure affected 5.41 percent of mortgage loans.  This was a decline of 24 basis points from the previous quarter and 137 basis points from the same period in 2012.

"We continue to see substantial improvement in both delinquency and foreclosure rates, with most measures now back to pre-crisis levels," said Michael Fratantoni, MBA's Chief Economist and Senior Vice President of Research and Industry Technology.  "The delinquency rate, at 6.39 percent, is more than 3 percentage points lower than its peak of over 10 percent in 2010 and is edging closer to the historical average of around 5 percent.  The percentage of loans in foreclosure has fallen for the seventh consecutive quarter, decreasing to 2.86 percent, the lowest level in six years.  The percentage of new foreclosures started, at 0.54 percent, is the lowest in eight years and is back within its typical historical range.  

Forty-nine states and the District of Columbia saw foreclosure rates decline.  Florida still has the highest foreclosure inventory at 8.56 percent, but the state was at 14.5 percent at its peak.  New Jersey and New York had the second and third highest rate.  MBA said that states with judicial foreclosure systems still account for most of the loans in foreclosure.  Of the 17 states that were above the national average on this measure 15 were judicial states.  While foreclosure inventories in both types of states are decreasing the average rate is 4.92 percent in judicial states and 1.52 percent in nonjudicial states.

Fratantoni said that about one fifth of all states saw an increase in foreclosure starts, but quarterly movements in this measure have often been the result of changing state laws. The timing associated with these changes and implementation have resulted in swings in the foreclosure start rate; these are sometimes offset by changes in the serious delinquency category

FHA delinquencies increased over the quarter by 41 basis points, but are still down 70 points relative to a year ago.  The growth was driven by a 37 basis point increase in loans one payment past due while foreclosure measures declined both quarter to quarter and year-over-year.

The National Delinquency Survey has been conducted by MBA since 1953.  It covers 41 million loans, representing approximately 88 percent of all senior residential mortgage loans on one-to-four family houses.  This quarter's loan count saw a decrease of 360,000 loans from the previous quarter, and a decrease of 1,200,000 loans from one year ago. Loans surveyed were reported by approximately 120 lenders, including mortgage bankers, commercial banks, and thrifts.