MBA: Q4 delinquencies down, foreclosures up
* The overall mortgage delinquency rate fell to 9.47% in Q4 2009 from 9.64% in Q3 2009. That's the first quarter-over-quarter decline in delinquencies since Q1 2007. Of particular note: The percentage of loans 30 days behind on payments dropped to 3.31% -- the lowest since Q2 2008. That is an encouraging sign because it signals that fewer borrowers are entering the delinquency/foreclosure process, the first step toward recovery. But let's be clear that the overall delinquency rate is still much, much higher than the recent low of 4.31% in Q1 2005.
* Breaking it down by loan type, the subprime DQ rate fell to 25.3% from 26.4% while the prime-only DQ rate dropped to 6.73% from 6.84%. The FHA delinquency rate slipped to 13.6% from 14.4%, while the VA DQ rate fell to 7.4% from 8.1%.
* What about foreclosures? The percentage of loans in any stage of foreclosure rose to 4.58% from 4.47%. Both prime and subprime foreclosure rates rose to new highs. However, the rate of foreclosure STARTS fell to 1.2% from 1.42%. That's the lowest percentage of loans entering the foreclosure process since Q4 2008.
I pointed out as far back as May 2009 that it appeared the housing market was stabilizing. My call: That cheaper home prices, low mortgage rates, increased affordability, and the overall improvement in the economy would cause sales rates and construction activity to stabilize. I added that inventory levels had peaked, but that prices would likely still be under pressure through the end of 2010.
Why share that background information? Because we're now seeing the next piece of the puzzle fall into place. Specifically, early stage delinquencies are stabilizing. This is a key sign that housing market conditions are slowly, grudgingly, getting slightly better. We're also seeing foreclosure starts fall as loan modification efforts ramp up and regulatory forbearance shifts into high gear.
This does NOT mean we'll have a vigorous recovery. We won't. Many loan mods will fail, the unemployment rate remains elevated, and lending standards will remain relatively strict for some time. But almost five years after the crash began, it's encouraging to see yet another indicator pointing toward broad-based stabilization.