For some reason, the press keeps missing this data. Fewer mortgages were in foreclosure or delinquent in the first quarter, according to recent data released by the Mortgage Bankers Association. Instead, all the headlines are catching the negative pricing news. But if fewer people are in trouble with their mortgages, doesn’t that mean that the worst is behind us? Of course it does. Read on…
According to the group’s National Delinquency Survey, 12.31% of mortgages were in foreclosure or had at least one payment past due in the first quarter, down from 13.6% in the fourth quarter, on a non-seasonally adjusted basis. In the first quarter of 2010, the combined percentage of mortgages either delinquent or in foreclosure reached 14.01%.
Meanwhile, the percentage of mortgages somewhere in the foreclosure process was 4.52% in the first quarter, down from 4.64% in the fourth quarter and 4.63% a year ago.
And foreclosure starts are now at their lowest level since the end of 2008: Foreclosures were started on 1.08% of mortgages, down from 1.27% in the fourth quarter and 1.23% a year ago.
Seasonally adjusted, the delinquency rate increased in the first quarter, rising to 8.32% from 8.25% in the fourth quarter; the rate was 10.06% in the first quarter of 2010. The nonadjusted delinquency rate, however, dropped to 7.79% in the first quarter from 8.96% in the fourth quarter; the rate was 9.38% a year ago. The delinquency rate covers mortgages that are at least one payment past due but not yet in foreclosure.
“Most of these numbers continue to point to a mortgage market on the mend,” said Jay Brinkmann, MBA’s chief economist, in a news release. He also said that the numbers continue to be heavily influenced by a few states with substantial foreclosure problems.
The MBA survey covers 43.6 million mortgages on one- to four-unit residential properties. It represents 88% of the total number of first-lien mortgages outstanding.
Brinkmann said the market is “not healed yet, but things are looking better than last year or the year before.” That’s primarily due to job creation and some improvement in the economy. If those trends continue, Brinkmann expects to see continued improvement in the mortgage market.
“Short-term delinquencies remain at pre-recession levels,” he said in their recent release. “Foreclosure starts are at the lowest level since the end of 2008 and had the second largest drop ever. The percentage of loans somewhere in foreclosure is down from last quarter’s record high and also had one of the largest drops we have ever seen, although the reasons for the drop will differ from market to market,” he said.
Brinkmann also pointed out that mortgages 90 days or more delinquent have dropped for five quarters in a row. Mortgages in that delinquency category are now at their lowest level since the beginning of 2009 — and the decline was driven by the improvement in mortgages that originated between 2005 and 2007.
“These are the loans that drove the mortgage market collapse and now represent about 31% of loans outstanding but 65% of the loans seriously delinquent. Given that loans originated during this period are now past the point where loans normally default, and that loans originated since then generally have better credit quality, mortgage performance should continue to improve,” Brinkmann said.
Brinkmann also said that we’re currently in the third stage of the foreclosure crisis.
In the first stage, problems were created by subprime and low-documentation mortgages, particularly in certain states, he said. Then, it became more of a national problem with the recession, as unemployment rose.
“Now we’ve entered the third stage, in which we have spotty recovery,” Brinkmann said. “Some of the national numbers continue to be dominated by problem areas.” Brinkmann warned that national statistics are “somewhat meaningless” in real estate because local conditions determine home values.
Is this just a calming before the storm? The wave of ARMs that were taken in 2007 will be resetting
The Adjustable Rate Mortgage or ARM was the time bomb that blew a hole in the real estate bubble in
2007-2008. In the early 2000’s homeowners were convinced by banks, brokers and
even their friends that a mortgage fixed for 30 years was ‘unnecessary’. The logic was
that since most people moved or refinanced every 3-5 years why would you pay the
higher rate offered on 30 year fixed rate mortgages. So in droves homeowners traded
in their secure mortgages for lower interest rates and sexy offers to ‘cashout their
equity’. This duped millions into trading in the security of a mortgage interest rate fixed
for 30 years for a volatile ARM that would adjust in 1-5 years. (Not to mention the 6
accruing negative equity.)
Well, the first wave of ARMs adjusted in 2007, but they were mostly ‘band-aid’ loans
given to sub-prime borrowers with the advice that this would be a good ‘starter loan’
and that they should refinance the mortgage before it adjusted… In 2007-2008 we all
learned quickly what ‘sub prime ARMs’ were and how they seemed to single handedly
cripple our housing economy, wipe out triple A rated bonds and sent banks pleading for
relief from failure.
What very few have ever stated is that the ARMs of 2011 are even larger loan amounts
and represents an even greater quantity of borrowers.
ARMs will adjust program sold… 2 and 3 year ARMs seemed so aggressive to smart borrowers, but the 5
year ARM was sold as ‘a little more conservative’. What a terrible joke. What seemed
like a partial calming or even recovering of home values and stabilizing of sales in 2010
was merely the unsettling calm before the storm.
option ARMs that allowed borrowers to pay LESS THAN the interest payment due, thus2011 is the year the 5/1and let me tell you my friend, there was NEVER a more popular loan