Thursday, February 17, 2011

Mortgage Delinquencies in Decline but a Tough Road Ahead Remains

Fewer Americans are falling behind on their mortgage payments; in fact, the fewest in two years. Mortgages just one payment past due fell to their lowest level since just before the recession began. Is it delays in paperwork from insufficient paperwork and the foreclosure servicing scandal? No. It's actual fundamentals in the economy and the mortgage market. This may seem like a surprise to many how work in the industry.

It is interesting to note that as we got toward the end of 2010 we began to see another drop in weekly claims for unemployment insurance. I think that's a key driver of the short term delinquencies but many of those figure scan be shewed due to the way unemployment figures are reported. They are based on claims and if an individual doesn't make a claim, it may mean that he or she found employment or it can also mean that they simply ran out of unemployment benefits.

But even more significant is the improved underwriting that began after the mortgage market crashed. We're now past the delinquency peak on loans that were underwritten during the worst phase of the housing boom in 2006 and 2007.

The national delinquency rate fell 10 percent in the fourth quarter of last year to 8.22 percent, according to the Mortgage Bankers Association's latest survey. That's still high by historical standards, but it's a huge improvement. It's also good to see that the FHA delinquency rate improved slightly, from 12.62 percent to 12.26 percent, which is still high based on past years but a step in the right direction.

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