Unless you live in a state where courts handle foreclosure proceedings, don’t expect a flood of distressed properties to relieve for-sale inventory shortages anytime soon.
Both the share of U.S. mortgage loans in delinquency and those in the foreclosure process hit their lowest levels since 2008 last quarter, according to the latest national survey from the Mortgage Bankers Association.
The share of loans on one- to four-unit residential properties that had missed at least one mortgage payment fell to a seasonally adjusted 7.09 percent in the fourth quarter, down from 7.4 percent in the third quarter and 7.58 percent in fourth-quarter 2011. That’s the lowest delinquency rate since 2008, MBA said.
And though delinquency rates typically rise between the third and fourth quarter, even the non-seasonally adjusted rate fell to 7.51 percent in the fourth quarter, the trade group added.
The delinquency rate does not include loans in the foreclosure process. The percentage of loans that went into foreclosure for the first time last quarter was 0.7 percent, down from 0.9 percent in the third quarter and 0.99 percent in fourth-quarter 2011. That’s the lowest rate of foreclosure starts since the second quarter of 2007, the MBA said.
Overall, 3.74 percent of mortgage loans were in the foreclosure process at the end of last quarter. That’s down from 4.34 percent a year ago, and the lowest level since the fourth quarter of 2008.
"We are seeing large improvements in mortgage performance nationally and in almost every state," said Jay Brinkmann, MBA’s chief economist and senior vice president of research, in a statement. "The 30-day delinquency rate decreased 21 basis points to its lowest level since mid-2007."
A basis point is equivalent to one one-hundredth of a percentage point, or 0.01 percent.
The foreclosure starts rate decreased by the largest amount ever in the MBA survey and now stands at half of its 2009 peak, Brinkmann said. The 33 basis point drop in the foreclosure inventory rate is also the largest in the history of the survey.
He cautioned, however, that the delinquency rate for loans 90 days or more past due had risen by 0.08 percent, reversing a fairly steady pattern of decline, and is the largest increase in three years. The rise indicates foreclosure starts could see a modest increase in future quarters, Brinkmann said.
"The two biggest factors impacting the number of loans in the foreclosure process still are the magnitude of the problem in Florida and the judicial foreclosure systems in some states," Brinkmann said.
Although the percentages of loans in foreclosure dropped in almost all states, the average rate for judicial states was 6.2 percent — triple the average rate of 2.1 percent for nonjudicial states, Brinkmann noted.
In Florida, 12 percent of mortgages are in some stage of the foreclosure process. That’s down from last year’s peak of 14.5 percent, but "still an extraordinarily high rate that is impacting the national rate."
In judicial foreclosure states, reducing the number of loans in foreclosure "will have less to do with the recovery of the economy and the housing market than with the return to reasonable foreclosure timelines."
Seasonally adjusted delinquency rates fell from the third quarter for all loan types except those insured by the Federal Housing Administration (FHA). The FHA delinquency rate rose by three basis points to 11.17 in the fourth quarter.
"The performance of FHA loans is mixed. While the foreclosure starts and foreclosure inventory percentages both fell, the delinquency percentages generally remained flat or increased slightly, particularly the percentage of loans 90 days or more past due," Brinkmann said.
"However, 44 percent of the FHA loans that are seriously delinquent were made in the years 2008 and 2009, while loans made in those years represent a smaller share of FHA’s overall book of business."
The seasonally adjusted delinquency rate stood at 3.79 percent for prime fixed loans, 8.02 percent for prime adjustable-rate mortgage loans, 19.15 percent for subprime fixed loans, 22.34 percent for subprime ARM loans, and 5.97 percent for loans guaranteed by the Department of Veterans Affairs.
All loan types saw quarter-to-quarter decreases in foreclosure inventory in the fourth quarter. The foreclosure inventory rate stood at 2.1 percent for prime fixed loans, 6.68 percent for prime ARM loans, 18.24 percent for subprime ARM loans, 9.28 percent for subprime fixed loans, 3.85 percent for FHA loans, and 2.08 percent for VA loans.