Foreclosure Inventory Ties All-Time High, Delinquencies Down

February 18, 2011 (Chris Moore)
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The amount of U.S. homes that were in the foreclosure process at the end of 2010 matched the all time high as mortgage lenders and servicers delayed home foreclosures to investigate improper document charges spawning from the “robo-signing” controversy.

According to the National Delinquency Survey released by the Mortgage Bankers Association (MBA), about 4.63 percent of loans were in foreclosure in the fourth quarter, up from 4.39 percent in the previous quarter. The record-tying rate of homes in foreclosure was last reached in the first quarter of 2010.

Lenders such as Bank of America and Chase temporarily halted property seizures as they reviewed the handling of their court documents which left more homes in the foreclosure process with their status unresolved. Consequently repossessions tumbled 32 percent in the fourth quarter compared to the previous quarter.

“It’s clear that the process issues were driving the increase,” Jay Brinkmann, chief economist of the Washington- based Mortgage Bankers Association, said in an interview. “We would expect the foreclosure inventory to start coming down as that gets resolved and the court situations get cleared up.”

The report also revealed that mortgage delinquency rates dropped sharply as residential mortgage delinquencies fell by 10 percent in the fourth quarter of 2010 with the overall rate of outstanding loans at 8.22 percent, a decline from 9.13 percent in the third quarter.

The report also noted that mortgages only one payment past due, 3.25 percent of all outstanding mortgages, have fallen to the pre-recession levels of late 2007

Combined, the percentage of loans in foreclosure or at least one payment past due was 13.56 percent on a non-seasonally adjusted basis, a 22 basis point decline from 13.78 percent in the prior quarter

“These latest delinquency numbers represent significant, across-the-board decreases in mortgage delinquency rates in the U.S.” said Jay Brinkmann, MBA chief economist. “Total delinquencies, which exclude loans in the process of foreclosure, are now at their lowest level since the end of 2008. Mortgages only one payment past due are now at the lowest level since the end of 2007, the very beginning of the recession.”

Even more significantly, Brinkmann said, serious mortgage delinquencies of 90 days or more have fallen from their all-time high of 5.02 percent in early 2010 to 3.63 percent by year’s end, a 28 percent decline over the course of the year.

“While delinquency and foreclosure rates are still well above historical norms, we have clearly turned the corner,” Brinkmann said. “Absent a significant economic reversal, the delinquency picture should continue to improve during 2011,” he added.

Tags: MBA, mortgage lenders, servicers, foreclosure process, robo-signing controversy, property seizures, foreclosure inventory, mortgage delinquency rate