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Mortgage group: Loans past due and in foreclosure at 4-year low

May 16, 2012|By E. Scott Reckard
  • A Riverside foreclosure attracts protesters in February.
A Riverside foreclosure attracts protesters in February. (Irfan Khan / Los Angeles…)

In another flicker of hope for the battered housing markets, home loans in foreclosure or at least one payment past due have declined to the lowest level since 2008, according to a Mortgage Bankers Assn. delinquency report

The quarterly study, released Wednesday morning, said 7.4% of all loans on 1-unit to 4-unit properties were past due at the end of the quarter, taking seasonal factors into consideration. That was down from 7.58% at the end of the fourth quarter and 8.32% a year earlier.

The number of homes actually being repossessed remained high, as lenders worked through huge backlogs of distressed properties. Homes in foreclosure represented 4.39% of all homes, up from 4.38% in the fourth quarter but down from 4.52% a year earlier.

Combining delinquent loans and mortgages in foreclosure proceedings, one of every nine U.S. mortgages was showing at least initial signs of distress. Still, that was down by about a percentage point from a year ago and from the final quarter last year.

"Mortgage delinquencies normally fall during the first quarter of the year, but the declines we saw were even greater than the normal seasonal adjustments would predict," said Michael Fratantoni, vice president of research at the home lender group. "So delinquencies are clearly continuing to improve."

As in other recent reports, there was an enormous split between states in which foreclosures are handled within the court system and states in which homes are usually repossessed and sold outside the courts. 

In California, a non-judicial foreclosure state, 3.3% of homes were in foreclosure -- more than a percentage point below the national average. Arizona, another state with foreclosures outside the courts, had 3.6% of its homes in foreclosure proceedings.

The contrast with judicial states such as Florida (14.3% in foreclosure) and New Jersey (8.4% in foreclosure) was stark.

"They're going to have a lingering problem for years," Fratantoni said in an interview.

New foreclosure actions were started on 0.96% of all homes during the first quarter, down from 0.99% last quarter and 1.08% one year ago.

The most problematic loans continue to be those made at the peak of the housing bubble. The Mortgage Bankers Assn.'s category of seriously delinquent loans -- those in foreclosure or more than 90 days in arrears -- remains three times the long-term average, Fratantoni said, and 60% of these badly distressed loans were made from 2005 through 2007.

The Mortgage Bankers Assn., a Washington-based based trade group, represents companies that write property loans, most of which are sold as fodder for mortgage-backed securities.

Its report arrives amid evidence of a nascent housing recovery, particularly in Western states, with the Commerce Department on Wednesday reporting an increase last month in homebuilding.

A recent report from San Diego researcher DataQuick showed the number of homes entering foreclosure in California was down 17.6% year over year, at the lowest level since mid-2007. Santa Ana researcher CoreLogic said greater use of loan modifications, short sales and deeds-in-lieu by lenders had contributed to the foreclosure downturn.

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