Delinquencies on residential mortgage loans increased in the fourth quarter 2005, while the percentage of loans in the foreclosure process fell, according a survey released by the Mortgage Bankers Association today.
The delinquency rate for mortgage loans on one-to-four-unit residential properties was 4.7 percent at the end of the fourth quarter, up from 4.38 percent in the fourth quarter of 2004 and 4.44 percent in the third quarter of 2005, according to the fourth-quarter report.
Meanwhile, the percentage of loans in the foreclosure process was 0.99 percent at the end of the fourth quarter, a drop of 16 basis points from the previous year and an increase of 2 basis points from the third quarter of 2005, according to MBA. The seasonally adjusted rate of loans entering the foreclosure process was 0.42 percent in the fourth quarter, down 4 basis points from the previous year and up 1 basis point from the previous quarter.
“The increase in delinquencies is not surprising,” said Doug Duncan, MBA’s chief economist and senior vice president. “We have been expecting an up-tick in delinquencies due to a number of factors: the seasoning of the loan portfolio, the increased shares of the portfolio that are ARMs (adjustable-rate mortgages) and subprime mortgages, as well as the elevated level of energy prices and rising interest rates.”
Fourth-quarter delinquency percentages include the impact of Hurricane Katrina, which caused higher delinquency rates in Louisiana and Mississippi resulting from the destruction and dislocation caused by the storm. Delinquency statistics for all loan types were much lower once the hurricane effects are eliminated from the fourth-quarter statistics.
If the effects of Hurricane Katrina are removed from national statistics, the total delinquency rate would have been 4.44 percent in the third quarter and 4.55 percent in the fourth quarter, MBA said.
The non-Katrina percentages were calculated by using adjusted second quarter of 2005 numbers for Louisiana and Mississippi, instead of their fourth-quarter numbers. The hurricane’s impact has resulted in elevated delinquency rates and may result in somewhat higher foreclosure rates for at least the next few quarters.
“The effects of Hurricane Katrina in Louisiana and Mississippi are reflected in the overall level of national delinquencies,” said Duncan. “The low foreclosure rates in Louisiana and Mississippi are due to the voluntary forbearance opportunity offered by lenders immediately following this catastrophic storm.”
The seasonally adjusted delinquencies for adjustable-rate loans are up from last year and last quarter, and seasonally adjusted delinquencies are generally up among fixed-rate loans. For 2005, the seasonally adjusted delinquency rate for prime ARM loans is up 43 basis points (from 2.11 percent to 2.54 percent), while the percentage among prime fixed-rate loans increased 17 basis points (from 2.04 percent to 2.21 percent). Since the fourth quarter of 2004, the seasonally adjusted delinquency rate for subprime ARM loans has increased 178 basis points (from 9.83 percent to 11.61 percent), while the rate for subprime fixed-rate loans dropped 2 basis points (from 9.72 percent to 9.7 percent).
Since last quarter, the seasonally adjusted delinquency rate for prime ARM loans increased 24 basis points and the rate for prime fixed-rate loans increased 10 basis points. Compared with the third quarter of 2005, the seasonally adjusted delinquency percentage among subprime ARM loans increased 106 basis points, while the rate for subprime fixed-rate loans increased 91 basis points.
Over the last year, the seasonally adjusted delinquency rate increased among all loan types, except for VA loans. Since the fourth quarter of 2004, the seasonally adjusted delinquency rate rose 25 basis points for prime loans (from 2.22 percent to 2.47 percent), 130 basis points for subprime loans (from 10.33 percent to 11.63 percent), 95 basis points for FHA loans (from 12.23 percent to 13.18 percent), while decreasing 16 basis points for VA loans (from 6.97 percent to 6.81 percent). Since the third quarter of 2005, the seasonally adjusted delinquency rate increased 13 basis points for prime loans, 87 basis points for subprime loans, and 43 basis points for FHA loans, whereas the delinquency rate fell 31 basis points among VA loans.
Compared with last year, the foreclosure inventory percentage dropped for all major loan types. Compared with the fourth quarter of 2004, the percentage of loans in foreclosure decreased for all loan categories: 7 basis points for prime loans (from 0.49 percent to 0.42 percent), 49 basis points for subprime loans (from 3.82 percent to 3.33 percent), 33 basis points for FHA loans (from 2.67 percent to 2.34 percent), and 37 basis points for VA loans (from 1.5 percent to 1.13 percent). Since the third quarter of 2005, the foreclosure inventory percentage increased 1 basis point for prime loans, 2 basis points for subprime loans and 9 basis points for FHA loans, while the percentage decreased 6 basis points for VA loans.
Over the last year, the seasonally adjusted rate of new foreclosures decreased for all loan types, except among subprime companies. Compared with the fourth quarter of 2004, the seasonally adjusted rate of new foreclosures decreased 2 basis points for prime loans (from 0.2 percent to 0.18 percent), 15 basis points for FHA loans (from 1.06 percent to 0.91 percent) and 14 basis points for VA loans (from 0.48 percent to 0.34 percent). Among subprime loans, the new foreclosures rate remained unchanged (1.47 percent). Compared with the third quarter of 2005, the rate of new foreclosures increased 8 basis points for subprime loans and 3 basis points for FHA loans, while declining 5 basis points among VA loans. Among prime loans, the new foreclosure rate remained unchanged (0.18 percent).
The seriously delinquent rate, defined as the non-seasonally adjusted percentage of loans that are 90 days or more delinquent or in the process of foreclosure, is up from last year and last quarter. This measure conforms with a number of standard definitions and is designed to account for inter-company differences on when a loan enters the foreclosure process. In the fourth quarter of 2005, the percent of loans that were seriously delinquent was 2.08 percent, 1 basis point higher than fourth quarter of 2004 and 26 basis points higher than third quarter of 2005.
This quarter’s survey results cover more than 41.2 million loans (31.1 million prime loans, 5.5 million subprime loans and 4.6 million government loans).
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