Mortgage delinquencies jump, but foreclosures show a bright spot

The endless barrage of numbers quantifying the housing crisis can numb the mind after awhile, but here are a few more to wrap your brain around:

• Home loans past due or in the foreclosure process in the U.S.: 1 in 10.
• Home loans past due or in foreclosure in California: 1 in 9.

The latest quarterly survey from the Mortgage Bankers Assn. shows the delinquency rate for all U.S. mortgages on one-to-four-unit residential properties at 6.99%, up from 5.59% a year earlier. California's delinquency rate was about the same at 6.98%

California had more homes in the foreclosure process, however, according to the MBA: 3.9% of all homes, compared with 2.97% of homes nationally.

MBA economist Jay Brinkmann said the national trends still reflected intense problems with adjustable-rate subprime mortgages in California and Florida.

"Prime and subprime ARMs continue to have the highest share of foreclosures, and California and Florida have about 54% and 41% of the prime and subprime ARM foreclosure starts, respectively.  Until those two markets turn around, they will continue to drive the national numbers,” Brinkmann said.         

If the report had a bright spot, it was that foreclosure starts are actually tapering off a bit in most categories, perhaps reflecting more efforts by lenders and loan servicers to modify loans. State data provided to The Times by the mortgage trade group showed that 92,711 homes in California entered foreclosure proceedings during the third quarter, down from 110,023 in the second quarter and about the same as 92,729 in the first quarter.

The MBA blamed the sagging economy and rising unemployment for worsening the crisis that began with the abandonment of traditional lending standards during the housing boom. The group said its survey covered more than 80% of the home loans in the country.

Update: Comments on this morning’s posting on mortgage delinquencies and foreclosures hitting a combined 10% questioned whether the delinquency figures might already include the foreclosure numbers.

I asked Mortgage Bankers Assn. economist Jay Brinkmann about double-counting and he said no -- loans in foreclosure are separate from delinquent loans. So the correct combined numbers during the third quarter, according to the MBA count, were 9.96% nationally and 10.88% in California. 

The MBA is also sure it’s not double-counting foreclosures, Brinkmann said. (That can occur sometimes because of multiple filings at different stages of the foreclosure process.)

One comment also noted that Arnold Schwarzenegger had proposed a 90-day moratorium on foreclosure sales, which would mess up the numbers. The governor’s proposal was made in early November, well after the MBA survey period, which ended Sept. 30.          

-- E. Scott Reckard 

Comments

[Pat]

Are you sure that the mortgage delinquencies don't already include the homes in foreclosure. I am not sure you can just add up the 2 numbers.

[dclogang]

um... wasn't there some governor signed legislation that has delayed foreclosures only by 90 days. If so, yea, the foreclosures would taper off a bit but it's only delaying slightly the number of houses that will go into foreclosure.

Just yesterday the LA County Sheriff's office knocked on my neighbors door. The neighborhood could hear the officer talk over the loud speaker "The resident of XXXXX come out of your house" then he went up to the door and you could hear him say something like. "You are being evicted"

He he was booted out of the house. It's sad but the house was sold for $390,000 in April of this year and a year prior to that it was sold for guuulp over $700,000??!??! I looked it up on zillow.com.

House prices HAVE to and WILL correct no matter how painful. But if most people during the boom didn't have any kind of down payment in the first place then what's the big deal. Yea, their credit will be shot but is there any credit left to be had anyway. Best to walk away now.. and walk away fast and let the correction take place so things get back to um... normal? whatever that is.

[shouldntbeblogging]

Foreclosures will pick back up when recent legal modifications to the foreclosure process are completely integrated into the system. I think that our trusted lawmakers added this temporary lag into the system so that there would be a momentary dip in foreclosures which the media (including this blog) would use to propose that maybe things are improving. This will likely backfire when foreclosures increase again due to the fact that nothing has changed.

Nothing has fundamentally changed to cause this decrease and nothing will have changed to cause the subsequent increase later. We will be given a quick peek of blue sky and then we will be shoved back into the mud.

This is what everyone thinks will save the system. There is no gas in the tank but those that run this country think that if we could just get the engine started then the gas will magically show up to keep it running. This only leads to more despair as the engine will once again stall when the promised fuel does not materialize.

Or it will work and we all can resume spending like there is no tomorrow to worry about. Either way it is not good.

The natural forces of our economy should be permitted to run their course. That is the only way capitalism can work. If there are no consequences there is no point in doing anything individually or collectively.

[waitingitout]

Pat,

According to the story picked up in Calculated Risk, the MBA survey delinquencies do not include those in the foreclosure process. To the extent that you're dealing with survey numbers, and there is error built into the estimates, you can add the two.

[Ditech Home Loans]

Now that lenders have returned to traditional underwriting guidelines, it's just a matter of time for housing prices to drop to normal levels according to market demand, which is driven by qualified borrowers. Unqualified homeowners and many of the lenders that funded their mortgages will eventually be replaced to support a more stable market.

[Laker]

dclogang wrote: "....But if most people during the boom didn't have any kind of down payment in the first place then what's the big deal. ..."

Funny,
But when i started renting my current house couple years ago, I actually put MORE "down payment" money as a renter than the average joe flipper-buyer of 2005-2007. I put 1 month security deposit, 1 last month, and 1 first month. So my "down payment was about $7000. The average buyer of 2005-2007 put zero down. Some actually were paid couple of thousand so they could go buy furniture of buy a new car....(105% financing)

[Laker]

shouldntbeblogging wrote: "...There is no gas in the tank but those that run this country think that if we could just get the engine started then the gas will magically show up to keep it running. This only leads to more despair as the engine will once again stall when the promised fuel does not materialize...."

shouldntbeblogging ,
The problem is that not only there is no gas, but there is also no oil in the engine. That means that if you attempt to start it with no oil, it will burn and get damaged. The less you try the easier to fix it will be. The more you try to band-aid fix, the more damage will occur. That is the more bailouts we try the worse unintended consequences will happen.
The true solution is to do an over whole rebuilding the engine. That means letting the market sort itself, not giving a 1 red cent to failed companies but letting them fail and creating new ones that are viable, and strong. Let the scum get burned and reward to honest true, and deserving tax payers!

[dclogang]

Laker wrote: "I actually put MORE "down payment" money as a renter than the average joe flipper-buyer of 2005-2007"

Yea, I was joking about "what's the big deal" of course.

You know, Laker "you are paying more in rent than if you simply purchased a house." This is what a real estate agent told me who came to my front door asking if I was thinking about selling "my" house. She said this after I told her I didn't own it and that I was renting.

Somebody help me come up with an analogy that a real estate agent could understand so that when I'm confronted with that statement (non-sense) again I can tell it to him/her so they will understand.

[dclogang]

"Now that lenders have returned to traditional underwriting guidelines"

Have ALL lenders returned to traditional underwriting, are you sure?? hmm.

[CompaJD]

I am pretty sure there will be a brighter spot once these banks have to highlight every troubled loan on their books. If you gather all their books together they will become brighter than a Supernova. You will be able to see the brightness from space.

[RM]

Up until recently, one might have assumed that some/many of the borrowers going delinquent were doing so to qualify for loan modification. However since a few months ago it would not be surprising that those becoming delinquent are doing so from a loss of job or income. In having lenders require that a loan first become delinquent before it could be considered for a loan modification is a slippery road. Borrowers, attempting this route, once behind in payments several months, might fall behind enough to not be able to get themselves current on their loan if approved for the modification. Also once a borrower has to pay up many thousands of dollars, they may become greedy and decide to just stick the bank with a loss.

[Samantha Holterman]

I have a 2nd mortgage with Citi Bank, I am filing for bankruptcy and want to reaffirm my mortgage, but at a lower interest rate (12.5%), I am 3 months behind, my attorney told me, that I needed to be at least 3 months behind, because that is when they start working with you. I am so upset about everything, I have 2 more weeks of working, then I will be unemployed! I am not late on my first and the interest rate is 6%, I would like for them to make it a fixed rate! Why won't they help out? I do not understand, these are desperate times for people! Do I foreclose on my home? I know that the 1st mortgage holds title to the house, what happens to the second mortgage? I mean, if I file bankruptcy and foreclose on my home, the 2nd mortgage does not get a penny!!! Why wouldn't they want to work with me? Wouldn't it be in their best interest?
Someone please explain!!!