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Mortgage group: Encouraging signs in new delinquency numbers

The Mortgage Bankers Association last month gave the most encouraging assessment in several years on delinquent mortgages, reporting a 30-day tardy rate not seen nationally since the end of 2007, a period that marked the start of the current recession.

The delinquency rate for mortgage loans on one-to-four unit residential properties decreased to a seasonally adjusted rate of 8.22 percent of all loans outstanding as of the end of the fourth quarter. Jay Brinkman, MBA chief economist, said the fourth quarter rates are highly encouraging.

“Mortgages only one payment past due are now at the lowest level since the end of 2007… Perhaps most importantly, loans three payments (90 days) or more past due have fallen from an all-time high delinquency rate of 5.02 percent at the end of the first quarter of 2010 to 3.63 percent at the end of the fourth quarter of 2010,” he said, noting the declined marked a drop of 28 percent over the course of the year.

While the country’s 30-day lateness rate improved significantly, Mississippi’s climbed to 5.93 percent, tops in the country. The state’s overall delinquency rate remained among the highest in the nation at 13.3 percent.

The Mortgage Bankers Association also reported that foreclosures had reached near historic highs but attributed that to process bottlenecks in Florida and California, as well as the September-October period in which many big banks put moratoriums on new foreclosures.

The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure.

The combined percentage of loans in foreclosure or at least one payment past due was 13.56 percent on a non-seasonally adjusted basis, a decline from 13.78 percent last quarter. “I really see this announcement as being good news,” said Brinkman.

“Delinquencies were down across the board.”

Brinkman said the fourth quarter data bucked expectations in that normally delinquencies will a have seasonal peak in the final quarter, as the first winter heating bills begin arriving and forcing homeowners to decide between keeping the heat on or paying their mortgages. “They normally catch up in the first quarter,” he said.

Despite national foreclosures occurring at a 4.63 percent rate that tied the 41-year-old survey’s record set in 1Q 2010, Brinkman said: “I’d much prefer to have our current situation where delinquencies are falling and we’re seeing signs of recovery in our mortgage market.”

He attributed the improved payment rates to a better quality of loan underwriting over the past three years.

“If a loan is going to go bad traditionally it is going to go bad in the first three years, and we’re now getting past that.

“We now have a better set of loans going into the traditional default cycle. For that reason we see a continued decline in delinquency rate,” Brinkman added.

Further, defaults on reworked loans appear to have already been accounted for, according to Brinkman.

“While we know the default rate on reworked modified loans is high, we think we may have already seen that effect. And this [delinquency] rate would be even lower without that.”

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