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Delinquency Rates Up, But Foreclosures Down

by Chicago Agent

Delinquency rates rose slightly, but foreclosures were down, according to a new survey.

The delinquency rate for mortgage loans on one-to-four-unit residential properties increased in the second quarter of 2011, but loans under foreclosure decreased, according to the Mortgage Bankers Association’s National Delinquency Survey.

Delinquency rates rose to a seasonally adjusted rate of 8.44 percent of all loans outstanding as of the end of the second quarter of 2011, which is an increase of 12 basis points from the first quarter of 2011 but a decrease of 141 basis points from one year ago. The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure.

Not all the delinquency news is bad, though. The serious delinquency rate, which measures the percentage of loans that are 90 days or more past due, was 7.85 percent, a decrease of 25 basis points from last quarter and 126 basis points from the second quarter of last year.

Jay Brinkmann, the chief economist of the Mortgage Bankers Association, offered some context on the survey, highlighting its positive and negative findings.

“While overall mortgage delinquencies increased only slightly between the first and second quarters of this year, it is clear that the downward trend we saw through most of 2010 has stopped. Mortgage delinquencies are no longer improving and are now showing some signs of worsening,” Brinkmann said. “The good news is the continued decline in long-term delinquencies, those mortgages that are three payments or more past due. The bad news is that drop is offset by an increase in newly delinquent loans one payment past due.”

News is more positive on the foreclosure front. The percentage of loans on which foreclosure actions were started during the second quarter was only 0.96 percent, a 12-point decrease from last quarter and 15-point decrease from one year ago. The percentage of loans in the foreclosure process at the end of the second quarter was 4.43 percent, down 9 basis points from the first quarter and 14 basis points from a year ago.

Brinkmann also commented on the foreclosure data, suggesting that the worst may be over.

“Foreclosure start rates fell to their lowest level since the fourth quarter of 2007. Foreclosure inventory rates also fell, to their lowest level since the third quarter of 2010. While some have argued that this drop in foreclosures is a temporary drop which does not reflect the problems yet to come, this does not appear to be the case, at least at the national level,” Brinkmann said.”There are still many problem loans that need to be resolved, but the idea that there is a growing backlog of loans being held back from foreclosure is simply not supported by these numbers.”

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