Residential mortgage delinquencies crept up in the second quarter while the actual foreclosure inventory declined, the Mortgage Bankers Association reported today.

The seasonally adjusted delinquency rate for mortgage loans on one- to four-unit residential properties increased to 4.43 percent in the second quarter, up 10 basis points from 4.33 percent in the first quarter of this year. The foreclosure inventory percentage – the percentage of loans that are in the foreclosure process – at the end of the first quarter was 1.16 percent from the first-quarter rate of 1.27 percent. The seasonally adjusted percentage of new foreclosures decreased to 0.39 percent in the second quarter, down seven basis points from 0.46 in the first quarter.

“The percentage of serious delinquencies, which is defined as loans 90 days or more delinquent or in the foreclosure process, continues to improve,” MBA’s Chief Economist Doug Duncan said. “While the total of overall delinquencies increased 10 basis points, this was almost entirely due to a rise in the number of loans that are 30 to 59 days past due. We usually see a large seasonal drop in these short-term delinquencies in the first quarter, followed by a return to more normal levels in the second quarter. We saw similar upward blips of 13 and 12 basis points in the second quarters of 2002 and 2003, respectively, which were followed by declines in the third quarters.”

“Based on the continued expansion of the economy and strong home-price growth in many regions, it is unlikely this small upward blip represents a reversal of the downward trend in delinquencies we have seen since the middle of 2001,” Duncan said.

For prime loans, the seasonally adjusted delinquency rate increased from 2.26 percent in the first quarter to 2.4 in the second quarter. The percentage of prime loans in foreclosure was 0.49 percent in the second quarter, down four basis points from 0.53 percent in the first quarter. The percentage of prime loans in which foreclosures were started during the second quarter decreased from 0.2 to 0.19 percent.

Among subprime loans, the seasonally adjusted delinquency rate dropped from 11.19 percent to 10.04 percent during the second quarter. At the end of the second quarter, the foreclosure inventory percentage was 4.61 percent, down from 5.05 percent in the first quarter. The percentage of subprime loans in which foreclosures were started during the second quarter decreased from 1.99 to 1.18 percent.

Among Federal Housing Administration loans, the seasonally adjusted delinquency rate increased to 12.52 from 11.68 percent in the first quarter. At the end of the second quarter, the foreclosure inventory percentage was 2.59 percent, down from 2.78 percent.

The seasonally adjusted delinquency rate for Department of Veterans Affairs loans increased to 7.55 percent in the second quarter, up from 7.37 percent in the first quarter. The percentage of VA loans in foreclosure at the end of the second quarter was 1.45 percent, down from 1.53 percent.

On a year-over-year basis, the overall seasonally adjusted delinquency rate has declined in all categories: down 31 basis points in the 30 to 59 days delinquent category, eight basis points in the 60 to 89 days category and 15 basis points in the 90 days or more category.

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