Newly-Delinquent Mortgage Loans Fall

The share of mortgage loans in the foreclosure process remained unchanged at 4.43 percent while the foreclosure start rate increased 12 basis points to 1.08 percent.

Mortgage Bankers Association’s National Delinquency Survey revealed a 45 basis point decline in the share of delinquent loans (from 8.44 percent down to 7.99 percent) during the third quarter of 2011. This marks the lowest reading for loan delinquencies as a share of total loans outstanding in nearly three years.

MBA’s Michael Fratanton discussed likely reasons for the slight divergence between delinquencies and foreclosures:

“While the delinquency picture changed for the better in the third quarter, the foreclosure data indicated that we are not out of the woods yet and that the issues continue to vary by geography.

A closer look shows that there are different trends driving these results. The increase in the foreclosure starts rate this quarter was driven by large increases from just a few servicers, concentrated in certain hardest hit states. For most servicers, the foreclosure starts rate was little changed over the quarter.

In these states, the few large changes reflects the progression of delinquent loans through the foreclosure process. Outside of these states, improvement has continued, although at a slow pace due to the still-weak job market.

The proportion of loans in the 30-, 60- and 90+ day delinquency buckets all declined from the previous quarter. In fact, the share of mortgages 30 days overdue slipped to its lowest point since the first half of 2007, while the 90+ day overdue bucket registered its lowest reading since the fourth quarter of 2008.

Loans 90 days or more past due are particularly important indicator for foreclosure activity since these mortgages are the least likely to become current (via modification or some other procedure) and can generate an immediate notice of foreclosure from the loan’s servicer.

- Courtesy of NAHB