Delinquencies and Foreclosures Continue to Drop
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Second Quarter Delinquency Rate Lowest in Ten Years
WASHINGTON, D.C. (August 11, 2016) - The delinquency rate for mortgage loans on one-to-four-unit residential properties decreased 11 basis points to a seasonally adjusted rate of 4.66 percent of all loans outstanding at the end of the second quarter of 2016. This was the lowest level since the second quarter of 2006. The delinquency rate was 64 basis points lower than one year ago, according to the Mortgage Bankers Association's (MBA) National Delinquency Survey.
The percentage of loans on which foreclosure actions were started during the second quarter was 0.32 percent, a decrease of three basis points from the previous quarter, and down eight basis points from one year ago. This foreclosure starts rate was at its lowest level since the second quarter of 2000.
The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure. The percentage of loans in the foreclosure process at the end of the second quarter was 1.64 percent, down 10 basis points from the previous quarter and 45 basis points lower than one year ago. The foreclosure inventory rate was at its lowest level since the second quarter of 2007.
The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 3.11 percent, a decrease of 18 basis points from previous quarter, and a decrease of 84 basis points from last year. The serious delinquency rate was at its lowest level since the third quarter of 2007.
Marina Walsh, MBA's Vice President of Industry Analysis, offered the following commentary on the survey:
"Mortgage performance improved again in the second quarter primarily because of the combination of lower unemployment, strong job growth, and a continued nationwide housing market recovery. The mortgage delinquency rate tracks closely with the nation's improving unemployment rate. In the second quarter of 2016, the mortgage delinquency rate was 4.66 percent, while the unemployment rate was 4.87 percent. By comparison, at its peak in the first quarter of 2010, the delinquency rate was 10.06 percent and the unemployment rate stood at 9.83 percent.
"In addition, the delinquency rate of 4.66 percent for the second quarter of 2016 was lower than the historical average of 5.36 percent for the time period 1979 to the present. Among the various loan types, the delinquency rate improved for conventional loans as well as FHA loans. The FHA delinquency rate dropped to 8.46 percent, its lowest level since 2000.
"The percentage of new foreclosures initiated in the second quarter was 0.32, the lowest rate since 2000, and 13 basis points below the historical average of 0.45 percent. FHA loans saw a 15 basis point drop in the percentage of new foreclosures, which pushed the rate down to 0.48 percent, its lowest level since 1993.
"Continuing a downward trend that began in the second quarter of 2012, the foreclosure inventory rate fell again to 1.64 percent in the second quarter of 2016. The FHA foreclosure inventory rate dropped 26 basis points from the previous quarter to 2.15 percent, its lowest level since 2001.
"Of the 50 states and Washington, DC, 47 states either had no change or saw declines in the foreclosure inventory rate in the second quarter of 2016. New Jersey and New York had the highest percentage of loans in foreclosure, at 5.97 and 4.48, respectively. Florida's percentage of loans in foreclosure dropped to 2.72, a significant improvement over 2011, when it was the state with the nation's highest percentage of loans in foreclosure at 14.49 percent. California's percentage of loans in foreclosure was 0.66, the eighth lowest among all states in the nation."
NDS Note: Starting in the first quarter of 2016, we combined all non-government loans into a single conventional loan category. Conventional loans, which make up 78 percent of the NDS sample, had a 14 basis point decrease in delinquency rate, a seven basis point decrease in the percent of loans in foreclosure, and the foreclosure starts rate remained unchanged. Historical data with the split of conventional, FHA and VA loans is now available. Figure 2 displays key results of this new series.
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The above data were obtained in cooperation with the Mortgage Bankers Association (MBA), which produces the National Delinquency Survey (NDS). The NDS, which has been conducted since 1953, covers 38 million loans on one- to four- unit residential properties. Loans surveyed were reported by over 100 lenders, including mortgage bank, commercial banks, and thrifts.