MBA Q4 delinquency and foreclosure rates rise to fresh records
* The overall mortgage delinquency rate surged to 7.88% in Q4 2008 from 6.99% in Q3 2008 and 5.82% a year earlier. This is yet another record high for the delinquency rate (the MBA data goes back to 1972).
* The subprime DQ rate climbed to 21.88% from 20.03% a quarter earlier and 17.31% a year earlier. The prime-only DQ rate rose to 5.06% from 4.34% in Q3 2008 and 3.24% a year earlier. Even prime fixed-rate loans, typically the best performing category, are deteriorating in quality -- the DQ rate there climbed to 3.92% from 3.35% a quarter earlier. Subprime ARMs continue to be the biggest dogs in the kennel. The DQ rate there hit 24.22%, up from 21.31% a quarter prior.
* The percentage of mortgages entering the foreclosure process inched up to 1.08% from 1.07% a quarter earlier. That tied the record high set in Q2 2008. The overall percentage of mortgages in any stage of foreclosure jumped to 3.3% from 2.97% in Q3 2008.
* Regionally, delinquency rates were the highest in Mississippi (13.1%), Nevada (11.1%), Florida (11.09%), and Michigan (11.08%). North Dakota (3.56%) and Alaska (3.81%) fared the best.
The deterioration in U.S. mortgage performance continued apace at the end of 2008. The collapse in former bubble markets drove the first wave of delinquencies and foreclosures. Now, we're experiencing a second, more powerful wave driven by sharp and widespread house price declines. Rising unemployment and the deepening recession are other key drivers of default.
The Obama administration has responded aggressively to combat the foreclosure crisis. It just launched an ambitious plan to modify more mortgages and allow more borrowers to refinance at lower rates, even if they're slightly upside down on their homes. But previous foreclosure prevention efforts have had a spotty record, with many loan modifications simply postponing the inevitable. It remains to be seen whether the latest plan will suffer the same fate. I have some concerns about how it works, which I've laid out in more detail here.