Delinquencies and Foreclosures Worsen - or Do They?

Most foreclosures now should arise from normal life events such as unemployment, illness and divorce, and from borrowers who choose to walk away from their underwater mortgage, even though they can make their monthly payments. Courtesy of Michigan Public Media

Mortgage Bankers Association reported that seasonally adjusted delinquencies for all loans rose to 10.1 percent in the first quarter, up from 9.5 percent the previous quarter and 9.1 percent a year earlier.

At the same time, foreclosures started for the first quarter rose to 1.17 percent, up slightly from 1.14 percent in the fourth quarter 2009, but down from 1.34 percent a year earlier.

In another hopeful sign, foreclosures started for subprime loans fell to 3.29 percent in the first quarter from 3.51 percent the previous quarter and 4.55 percent a year earlier. This may be largely because lenders made few subprime loans during the last year or so. Fraudulent loans should have been weeded out by now, along with households that were in over their heads from the start.

There remains cause for concern over the percentage of loans that are 30 days past due - a measure of loans that are slipping into trouble and possible candidates for future foreclosure. After falling for three consecutive quarters, the delinquency rate rose to 3.45 percent in the first quarter from 3.31 percent the quarter before, though the rate was down from 3.77 percent a year earlier.

The high rates of foreclosures and delinquencies in housing will continue to slow down the economic recovery process this country faces.

- Courtesy of NAHB