Residential mortgages either in foreclosure or delinquent at least one payment reached 13.16% in the second quarter, the highest percentage ever recorded by the Mortgage Bankers Association, the industry group said recently. Breaking down the numbers, the delinquency rate for mortgages on one to four unit properties increased to a seasonally adjusted 9.24% of all loans outstanding in the second quarter, up from 9.12% in the first quarter of this year. The total was 44% higher than the 6.41% delinquency rate recorded in the second quarter of 2008, according to the MBA’s national delinquency survey. The rate of delinquencies doesn’t include mortgages in the foreclosure process.
Mortgages in the foreclosure process saw similar increases reaching 4.3% of all mortgages, up from 3.85% in the first quarter and 2.75% in the second quarter of 2008, the MBA said. However, mortgages entering the foreclosure process during the second quarter actually fell slightly to 1.36% of all loans, down from 1.37% in the first quarter. The leveling off can be attributed in part to foreclosure moratoriums which were put in place while lenders waited for details of the Obama Administration’s “Making Home Affordable” plan, many of which expired in the second quarter. Foreclosure starts were still up from 1.08% in the second quarter of 2008.
The MBA’s survey covers 45 million mortgages on one to four unit residential properties, representing between 80% and 85% of all first-lien residential mortgage loans outstanding in the United States. One major shift in the nature of foreclosures during the quarter was noted by Jay Brinkmann, MBA’s chief economist who said, “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,” he said.  The “sand states”, California, Florida, Arizona and Nevada still have a “disproportionately high share of foreclosure starts,” Brinkmann said, but their share did decrease fractionally from the previous quarter.
The shift in foreclosure activity is yet another sign that the crisis has shifted from high risk subprime borrowers who were either speculating or were allowed to buy homes above their means to high credit score borrowers who are being impacted by job losses and unemployment. Brinkmann added, “Until the nation’s employment situation improves, it is unlikely that there will be meaningful reductions in the foreclosure and delinquency rates.” Compounding the issue are steep home price declines. Current studies are now showing that the percentage borrowers who owe more on their mortgage than their home is now worth is approaching 33% with some areas, like Miami-Fort Lauderdale, at rates in excess of 50%. Many of these homeowners will continue to be in danger of foreclosure, living one emergency away from financial hardship.
“Finally, while the various loan modification programs continue to have an impact on holding foreclosure rates below where they otherwise would be, the issue is that many of the foreclosures involve homes that are vacant, borrowers who no longer have jobs, or loans where there was fraud involved. Therefore, in measuring the effectiveness of industry or government loan modification programs it is necessary to compare the results not with the total foreclosure and delinquency numbers reported here but with the smaller subset of borrowers who can and want to qualify,” Brinkmann said.
For those borrowers that qualify, home loan modifications are proving to be the single best solution by reducing monthly mortgage payments back to a level of sustainable affordability. When a loan modification includes a reduction in principle owed on the mortgage the relief provided to the homeowner is even greater. To see if you qualify for a home loan modification and what your reduction in mortgage payments could be, call The Feldman Law Center today at (800) 527 8497.