Highest Delinquency Rate Since MBA Survey Inception

By Jennifer Yousfi
Managing Editor

The Mortgage Bankers Association announced yesterday (Thursday) that home mortgage delinquencies reached the highest level since the survey began in 1985.

For the fourth quarter of 2007, 5.82% of outstanding home loans were in delinquency on a seasonally adjusted basis. This figure represents a 23 basis-point increase from the third quarter of 2007 and an 85 basis-point increase from the same period a year prior.

Another 2.04% of mortgages were in some stage of the foreclosure process with 0.85% of mortgages entering the foreclosure process in the fourth quarter. Both levels are also at record highs.

The survey looks at 46 million home loans on a quarterly basis, capturing data on roughly 80% of the home mortgage market.

"Declining home prices are clearly the driving factor behind foreclosures, but the reasons and magnitude of the declines differ from state to state," Doug Duncan, MBA's Chief Economist and Senior Vice President of Research and Business Development said in a statement

Duncan also addressed regions that represent a disproportionate percentage of home delinquencies.

"In states like Ohio and Michigan, declines in the demand for homes due to job losses and out-migration have left those looking to sell the homes with fewer potential buyers, particularly with the much tighter credit restrictions borrowers now face," Duncan said. "In states like California, Florida, Nevada and Arizona, overbuilding of new homes created a surplus that will take some time to work through."

The survey noted that 38% of delinquencies were come from prime loans, either adjustable-rate and fixed - a sign that the subprime crisis is spilling over into other sectors of the credit market.

"Of significance, however, is that the rate reset issue on adjustable rate mortgages is becoming less of an issue. The 6-month LIBOR rate, the index rate used for many subprime ARMs, has come down around 2.5 percentage points since last September, greatly reducing the payment shock on many ARM resets," Duncan said.

But many homeowners aren't waiting for their adjustable-rate mortgage to reset before entering foreclosure.

"We're seeing people give up even before they get to the reset because they couldn't afford the home in the first place," Jay Brinkmann, vice president of research and economics for MBA, told Bloomberg News.

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