Not Out Of The Woods Yet; Mortgage Delinquences and Foreclosures On The Rise

1st Quarter Delinquencies; Up? Down? He said – She Said…

Mortgage Bankers Association Logo MBA

If you frequent this site, then you may recall that a little over a week ago (May 10th to be exact) I wrote a post that said the delinquency rate for homeowners mortgages had dropped in the first quarter of this year, the first drop since 2006. Now the post title says delinquencies have increased, so what gives?

Well, for one thing, different sources of information. The “good” delinquency report came from TransUnion and they get their data by doing a “random sampling” of their database of 27 million home mortgages, and then determine how borrowers are performing from that sample I assume. Today’s data comes from the Mortgage Bankers Association which, according to their report, pulls their information from 44.3 million loans which represents approximately 85 percent of all the “first-mortgage” loans in the US.

So, assuming my information is correct in terms of methodology, I would say the MBA data paints a much more accurate picture of the market, and in this case a more bleak picture.

Highlights from the MBA Report:

  • The delinquency rate for mortgage loans on one-to-four unit residential properties increased to a seasonally adjusted rate of 10.06 percent of all loans outstanding at the end of the first quarter of this year.
    • This represents an increase of 6.2 percent in the delinquency rate from the fourth quarter of 2009 and a 10.3 percent increase from a year ago.
  • Foreclosure actions were started on 1.23 percent of the outstanding loans in the first quarter of this year.
    • This is just a slight increase from the prior quarter when the rate was 1.20 percent but is a decrease of about 1 percent from a year ago.

“Seasonally Adjusted” could be the problem too:

If you ever read anything I write about real estate market stats, then you know I do not like “Seasonally Adjusted” numbers. Well, the MBA’s chief economist, Jay Brinkmann, said “the issue this quarter is that the seasonally adjusted delinquency rates went up while the unadjusted rates went down. Delinquency rates traditionally peak in the fourth quarter and fall in the first quarter and we saw that first quarter drop in the data. The question is whether the drop represents anything more than a normal seasonal decline or a more fundamental improvement. Most importantly, the normal seasonal drop is coming right at the point where we believe delinquencies could potentially be declining and the problem for the statistical models is determining which is which”.

Where we are headed:

We have TransUnion’s data showing an improvement and the MBA, non-seasonally adjusted data showing improvement as well, so perhaps this is an indicator that we are turning the corner? I think the April delinquency rates when they are published will help us see where things are headed.


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