–As Work Thru 2005-2007 Loans, Mtg Market Performance To Improve
By Brai Odion-Esene
WASHINGTON (MNI) – While data published Thursday shows the U.S.
delinquency rate rose in the first quarter of this year, further
examination shows that the bulk of housing market struggles remain
highly concentrated in just a handful of states, an official with the
Mortgage Bankers Association said Thursday.
“When we look at the data, we see evidence of a market on the
mend,” Mike Fratantoni, the MBA’s vice president in charge of
Single-Family Research and Policy Development, told Market News
International.
“Certainly there are some counter-currents there but for the most
part I think this is a positive story,” he said.
These counter-currents can be seen in the fact that 51% of
foreclosures are taking place in five states, with 24% just in Florida,
he said. So states badly hit by the downturn in the housing market “are
still really suffering from the overhang of supply from foreclosed
properties.”
“Those handful of states that were hardest hit are contributing
such a large number of problem loans that its impact, and in fact,
overshadowing the rest of the nation at this point,” he said.
Outside of those states, he predicted that some stabilization and
pickup in home sales activity will be seen more rapidly in the housing
market.
According to the MBA’s Q1’11 National Delinquency Survey, across
all loan types, the states with the highest overall delinquency rates
were Mississippi (11.84%), Georgia (10.66%) and Nevada (10.60%). Based
on foreclosure inventory, the states with the highest rates were Florida
(14.38%), Nevada (9.32%) and New Jersey (7.74%). Based on foreclosure
starts, the three states with the highest rates were Nevada (2.30%),
Florida (1.85%) and Arizona (1.81%).
The national picture show greater improvement, with the seasonally
adjusted total delinquency rate for mortgage loans on one- to four-unit
residential properties at 8.32% in the first quarter of 2011, an
increase of seven basis points from 8.25% in the fourth quarter of 2010
and down 174 basis points from 10.06% at the end of the first quarter of
2010.
“Most of these numbers continue to point to a mortgage market on
the mend,” the MBA’s Chief Economist Jay Brinkmann said in a statement
accompanying the report.
The serious delinquency rate, the percentage of loans that are 90
days or more past due or in the process of foreclosure, was 8.10%, a
decrease of 50 bps from last quarter, and a decrease of 144 bps from the
first quarter of last year.
Fratantoni highlighted the year-over-year decline in delinquencies,
particularly those loans that are 90 or more days past due.
In addition to declines in the rate of late-stage delinquencies,
Fratantoni also noted a large decline in foreclosure starts as well as a
“significant” decline in the foreclosure inventory rate.
The percentage of loans on which foreclosure actions were started
during the first quarter was 1.08%, down 19 bps from last quarter and
down 15 bps from one year ago. The percentage of loans in the
foreclosure process at the end of the first quarter was 4.52%, down 12
bps from the fourth quarter of 2010 and 11 bps lower than one year ago.
“Those rates remain high compared to more recent history but we are
on a downward path now,” he said.
To explain the significant drop in serious delinquencies,
Frantantoni said a large group of problem loans that were originated
between 2005 to 2007 are now past their peak delinquency rate. So while
they are still contributing to the rate of serious delinquencies, “they
are starting to be resolved.”
Once loans originated in the 2005 to 2007 period — loans that led
to the housing market meltdown — are worked through, Frantantoni said
he believes there will be “substantial” improvements in the housing
market.
Mortgage loans originated since then generally have better credit
quality, meaning mortgage performance should continue to improve.
In addition, the labor market is beginning to show signs of
improvement, he said, particularly in the private sector where the pace
of job growth appears to be accelerating.
An improving job market will be “the primary driver” of lower
delinquency rates, he said. “To the extent that we can get more people
getting paychecks, they are going to be able to remain current on their
loans.”
Commenting further on the first quarter delinquency data,
Fratantoni noted three things highlighted by the survey.
The first is that there was “a slight tick up” in early stage
delinquencies on a seasonally adjusted basis in loans that were 30 days
past due, he said.
Typically the first quarter of each year usually sees a big drop in
the deliquency rate, Fratantoni said, because borrowers will use tax
refunds to bring their loans current again after having fallen behind in
the fourth quarter.
The delinquency rate for mortgage loans that are 30 days past the
due date was 3.35% in the first quarter. Frantantoni said “this is back
to pre-recession levels for delinquency rates. We would see that as a
leveling off of at pre-recession rates for early stage delinquencies.”
Giving his outlook for the housing sector, Frantantoni said he does
not expect construction activity to add to economic growth until next
year.
There is enough inventory on the market to discourage builders from
adding new units, he said, “even in some of the stronger markets.” By
2012, the housing market will begin contributing to economic growth
again, Frantantoni predicted.
** Market News International Washington Bureau: 202-371-2121 **
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