By Mark Huffman
ConsumerAffairs.com
May 29, 2009
Despite this week's sharp rise in consumer confidence and other indications that the economy is improving, homeowners are still struggling. The delinquency rate on mortgage loans rose to 9.12 percent in the first quarter of 2009, the highest on record, on a seasonally adjusted basis, according to the Mortgage Bankers Association.
Foreclosure actions were initiated on 1.37 percent of first mortgages during the first quarter of 2009, the group said.
The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure. The percentage of loans in the foreclosure process at the end of the first quarter was 3.85 percent, an increase of 55 basis points from the fourth quarter of 2008 and up 138 basis points from one year ago. Both the foreclosure inventory percentage and the quarter to quarter increase are record highs.
The combined percentage of loans in foreclosure and at least one payment past due, meaning the percentage of mortgage holders not current on their mortgages, was 12.07 percent on a non-seasonally adjusted basis, the highest ever recorded in the MBA delinquency survey.
The increase in the foreclosure number is sobering but not unexpected, said Jay Brinkmann, MBAs chief economist. The rate of foreclosure starts remained essentially flat for the last three quarters of 2008 and we suspected that the numbers were artificially low due to various state and local moratoria, the Fannie Mae and Freddie Mac halt on foreclosures, and various company-level moratoria. Now that the guidelines of the administrations loan modification programs are known, combined with the large number of vacant homes with past due mortgages, the pace of foreclosures has stepped up considerably.
According to MBA, the new figures reveal some troubling changes. What has changed is the shifting of the problem somewhat away from the subprime and option ARM/Alt-A loans to the prime fixed-rate loans. The foreclosure rate on prime fixed-rate loans has doubled in the last year, and, for the first time since the rapid growth of subprime lending, prime fixed-rate loans now represent the largest share of new foreclosures.
In addition, almost half of the overall increase in foreclosure starts in the first quarter was due to the increase in prime fixed-rate loans. More than anything else, this points to the impact of the recession and drops in employment on mortgage defaults.
What has not changed, however, is the oversized impact of California, Florida, Arizona and Nevada in driving up the national numbers, Brinkmann said. Those states continue to account for about 46 percent of the foreclosure starts in the country, and represented 56 percent of the increase in foreclosure starts, including half of the increase in prime fixed-rate foreclosure starts.
Brinkmann said plunging home prices are having a severe impact on mortgage performance in those four states, hardest hit by foreclosures.
In the first three months of this year, foreclosure actions were started on 3.4 percent of the mortgages in Nevada, 2.8 percent of the mortgages in Florida, 2.5 percent of the mortgages in Arizona and 2.2 percent of the loans in California, he said. In comparison, the states with the highest foreclosure rates in the hard hit Midwest were Michigan and Illinois at 1.5 percent and Indiana and Ohio at 1.3 percent.
Brinkmann said he doesn't expect to see a decline in foreclosure action until there is a decline in the unemployment rate.
