Bright spot for mortgages: Missed payments ease

By Les Christie, staff writer

NEW YORK (CNNMoney) -- Mortgage delinquency rates among U.S. homeowners have fallen to their lowest levels in a few years, according to a report Thursday from the nation's mortgage bankers.

The quarterly National Delinquency Survey from the Mortgage Bankers Association (MBA) reported that the rate of mortgage borrowers at least one payment past due or whose homes have been repossessed by their banks declined 0.22 point to 13.56% at the end of December, their lowest level since late 2008.

Loans one payment past due were at 8.22%, down considerably from the 9.13% mark at the end of the third quarter and the lowest rate since the end of 2007, the beginning of the recession, the bankers said.

That, according to Michael Fratantoni, vice president of research and economics for the MBA, was very welcome news.

"I think we've turned the corner as concerned with loans 30 days late," he said. "It indicates that the economy has improved."

A second factor in the improvement is that mortgage underwriting has gotten so much stricter over the past few years, in the wake of the housing market collapse, that many of the loans most likely to fail have already done so.

The most dangerous years for mortgages are the third and fourth years, when delinquency rates peak, according to Fratantoni. The crop of mortgages entering into those dangerous years should not default as much because borrowers were so well qualified.

Another positive element in the report was that the percentage of seriously delinquent borrowers -- those 90 days or more late and considered very likely to lose their homes to foreclosure -- dropped precipitously over the last three quarters of the year, to 3.63% from 5.02% at the end of March 2010.

That should translate into far fewer borrowers losing their homes to foreclosure in the future.

Improvement in the economy, if it continues, should usher in a period of lower delinquency rates, according to Jay Brinkmann, the MBA's chief economist. The quarter's positive news was tied to the increase in hiring last year, when the private sector added about 1.2 million jobs.

"You need a paycheck to make a mortgage payment," Brinkmann said.

The biggest negative in the report was that the percentage of loans in foreclosure inventory hit an all-time high. These are loans in which the banks start to reacquire properties by scheduling auction sales.

Mortgages can exit this process by having the loan modified, the property sold through a short sale or transferred voluntarily to the bank, or sold at auction.

The MBA attributed the rise of loans in foreclosure inventory to the robo-signing issues that began to emerge in September. Banks deliberately slowed or suspended the foreclosure process, keeping them from exiting the category. That was especially true for states in which courts are involved in the process.

The delinquency rate was headed in the right direction even without adjusting for seasonal factors. Historically, the fourth quarter, explained Brinkmann, usually sees a jump in missed payments.

"In the fourth quarter, the first heating bill arrives and homeowners choose keeping the place warm," he said. "They make up the payments later."

This time, even the non-seasonably adjusted total past due rate dropped, from from 9.39% during the third quarter to 8.93% in the fourth. Brinkmann traced the gain the the improvement in the overall economy.

Of the states, Mississippi had the highest overall delinquency rate, with 13.3% of loans in some state of default. Nevada, at 12%, and Georgia, at 11.89%, also were very hard hit.

Florida, where the courts have substantially slowed the foreclosure process, has the highest percentage of loans in foreclosure inventory with 14.18% awaiting some kind of resolution. Nevada, at 10.06%, was second, and New Jersey, at 7.23%, was third. To top of page

Just the hot list include
Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Overnight Avg Rate Latest Change Last Week
30 yr fixed3.80%3.88%
15 yr fixed3.20%3.23%
5/1 ARM3.84%3.88%
30 yr refi3.82%3.93%
15 yr refi3.20%3.23%
Rate data provided
View rates in your area
Find personalized rates:
  • Find Homes for sale
    Real estate and homes for sale on Trulia

  • Property Type
  • Find a home in: New York | Atlanta | Chicago | Los Angeles
  • Washington D.C | Houston | Philadelphia | More options
Index Last Change % Change
Dow 32,627.97 -234.33 -0.71%
Nasdaq 13,215.24 99.07 0.76%
S&P 500 3,913.10 -2.36 -0.06%
Treasuries 1.73 0.00 0.12%
Data as of 6:29am ET
Company Price Change % Change
Ford Motor Co 8.29 0.05 0.61%
Advanced Micro Devic... 54.59 0.70 1.30%
Cisco Systems Inc 47.49 -2.44 -4.89%
General Electric Co 13.00 -0.16 -1.22%
Kraft Heinz Co 27.84 -2.20 -7.32%
Data as of 2:44pm ET


Bankrupt toy retailer tells bankruptcy court it is looking at possibly reviving the Toys 'R' Us and Babies 'R' Us brands. More

Land O'Lakes CEO Beth Ford charts her career path, from her first job to becoming the first openly gay CEO at a Fortune 500 company in an interview with CNN's Boss Files. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.