13% Of Homeowners In Default or Foreclosure

Posted on August 23 By Justin McHood

In the latest release of the Mortgage Banking Association national delinquency survey, 13.16% of all homeowners are either in foreclosure or at least one payment past due on a non-seasonally adjusted basis.

This number is the highest ever recorded in the MBA delinquency survey.

The number of loans that are either 90 days past due or in foreclosure also both set new record highs, both breaking the record set last quarter.

What different about the data on foreclosures in the survey is that the number of "Prime" mortgages that are in default are rising. According the survey and Jay Brinkmann, MBA’s Chief Economist:

“While the rate of new foreclosures started was essentially unchanged from last quarter’s record high, there was a major drop in foreclosures on subprime ARM loans. The drop, however, was offset by increases in the foreclosure rates on the other types of loans, with prime fixed-rate loans having the biggest increase. As a sign that mortgage performance is once again being driven by unemployment, prime fixed-rate loans now account for one in three foreclosure starts. A year ago they accounted for one in five. While 41 states had increases in the foreclosure start rate for prime fixed-rate loans, 43 states had decreases in that rate for subprime adjustable-rate loans.”

“The states of California, Florida, Arizona and Nevada continue to have a disproportionately high share of foreclosure starts, although the share has fallen slightly from last quarter. Those four states had 44 percent of all of the nation’s new foreclosures during the second quarter of this year, down from 46 percent in the first quarter.

Also somewhat concerning was the number of delinquencies in FHA loans. With the recent popularity of FHA insured loans over the last few years, we expect these numbers to rise - but how high they will go, no one is quite sure.

“We also saw a major jump in FHA foreclosures. The percentage of loans with foreclosures started, the percentage of loans in foreclosure and the percentage of loans 90 days or more past due are all records for FHA. While the foreclosure starts rate for FHA loans at 1.15 percent is lower than all other loan types with the exception of prime fixed-rate loans, the FHA percentages have remained low due to a large increase in the number of loans outstanding, the so-called “denominator effect”. If the number of FHA loans had stayed the same as a year ago and we saw the same number of foreclosures, the FHA foreclosure rate would be almost 1.5 percent.

Across the US even though the foreclosures are concentrated in 4 states (Florida, California, Nevada, Arizona) there is concern that as unemployment grows, foreclosure numbers will rise - no matter what state you live in... Which makes sense - without a job, it is difficult to pay your mortgage payment.

Justin McHood is a loan officer living in the Phoenix, Arizona area. You can find Justin on Facebook, Twitter, ActiveRain or LinkedIn and he is happy to answer any mortgage-related questions that you may have.

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