An Inside Look at Mortgage Delinquency Types, Information

The Mortgage Bankers Association (MBA) quarterly delinquency report is jammed full of information reported from dozens of different perspectives: all loans, prime, subprime, government guaranteed and not; national, regional, and by state; and by several different categories of delinquency.

With that in mind, it’s important for current owners and/or future borrowers to understand the various types of mortgage delinquency out there. Not all late payments and situations are created equal.

Delinquent: The non-seasonally adjusted percentage of loans for which payments are behind 30, 60, or 90+ days.

Seriously delinquent and loans entering foreclosure: Loans that are 90 days or more delinquent or have, within the quarter, become the subject of foreclosure action. Because companies have different policies on timing and on forbearance both of these categories are needed for a complete picture, i.e. some companies start formal legal procedures at 90 days; some may wait much longer, particularly where they are actively working with a debtor.

Foreclosure inventory: Those home loans that are in foreclosure but have not completed the judicial process, which is more time consuming in some states than in others.

The National Delinquency Survey encompasses 43.5 million first-lien mortgages on one-to-four family houses, a number that increased by 880,000 loans between the third and fourth quarters of 2006 and 2.2 million loans from one year earlier.

The subprime portion of this database includes 6 million in loans, 200,000 more than the previous quarter and 440,000 more than one year earlier. The survey covers 80 percent of outstanding loans in the U.S. and more than 50 percent of outstanding subprime loans.

The real concern lies in the escalation of ARMs that will experience rate adjustments over the next few years. All adjustable rate mortgages had higher seasonally adjusted delinquency rates compared to the third quarter of 2006.

Delinquency rates in the fourth quarter increased 33 basis points for prime ARM loans (from 3.06 percent to 3.39 percent) and increased 122 basis points for subprime ARMs (from 13.22 percent to 14.44 percent).

The foreclosure inventory rate increased for prime loans and subprime loans and decreased for FHA loans and VA loans from the third to the fourth quarter. The foreclosure inventory rate increased six basis points for prime loans (from 0.44 percent to 0.5 percent) and 67 basis points for subprime loans (from 3.86 percent to 4.53 percent).

The foreclosure inventory rate decreased nine basis points for FHA loans (from 2.28 percent to 2.19 percent) and eleven basis points for VA loans (from 1.12 percent to 1.01 percent).

SOURCE: Mortgage News Daily