National Delinquency and Foreclosures Rise; 

FHA Loans Show Improved Performance

By George Ratiu, Research Economist

Data for the first quarter of 2008 from the National Delinquency Survey released last week by the Mortgage Bankers Association confirms continuing deteriorating delinquency and foreclosure rates driven by poor subprime loan performance. FHA loans provided the only positive sign during the quarter, posting decreases in three survey categories-overall delinquency, seriously delinquent and foreclosure starts.

DELINQUENCIES

Overall seasonally-adjusted (SA) delinquency rates were up for all loans, except FHA. The delinquency rate increased from 5.82 to 6.35 percent. Delinquency rates for prime loans increased from 3.24 percent in the fourth quarter of 2007 to 3.71 percent in the first quarter of 2008. Rates for subprime loans went up 148 basis points (from 17.31 percent to 18.79 percent), following a 100 basis point increase in the previous quarter. Delinquency rates were also up 73 basis points for VA loans (from 6.49 percent to 7.22 percent). Meanwhile, delinquency rates decreased 33 basis points for FHA loans (from 13.05 percent to 12.72 percent).

On a year-over-year basis, delinquency rates increased across the board. The SA delinquency rates moved up 113 basis points for prime loans, 502 basis points for subprime loans, 57 basis points for FHA loans, and 73 basis points for VA loans.

Seriously delinquent rates (for loans that are 90 days or more past due or in the process of foreclosure) were up for all loan types, except FHA. The percentage of seriously delinquent loans for the first quarter was 4.03 percent-41 basis points higher than the previous quarter and 10 basis points higher year-over-year. Compared with the fourth quarter of 2007, the seriously delinquent rate increased from 1.67 percent to 1.99 percent for prime loans, from 14.44 percent to 16.42 percent for subprime loans, and from 2.83 percent to 2.88 percent for VA loans. The rate decreased 41 basis points for FHA loans (from 6 percent to 5.59 percent).

 

First quarter 2008 foreclosure rates by loan type
	Inventory	Starts
Prime ARM	3.45%	1.56%
Prime FRM	0.67%	0.29%
Subprime ARM	17.09%	6.32%
Subprime FRM	4.46%	1.80%
FHA ARM	4.07%	1.54%
FHA FRM	2.18%	0.82%
VA	1.24%	0.51%
Source: Mortgages Bankers Association

 

FORECLOSURES

Nationally, the number of foreclosures started was up 12.9 percent compared with the fourth quarter of 2007, while the number of loans in foreclosure inventory increased by 19.1 percent in the first quarter. Compared with the fourth quarter of 2007, the foreclosure starts rate increased from 0.41 percent to 0.54 percent for prime loans, from 3.44 percent to 4.06 percent for subprime loans, and from 0.39 percent to 0.5 percent for VA loans. FHA loans posted a decrease in the foreclosure starts rate of four basis points (from 0.91 percent to 0.87 percent).

The foreclosure inventory rate also increased nationally for all loans, from 2.04 percent in the fourth quarter of 2007 to 2.47 percent in the first quarter of 2008. On a year-over-year basis, the foreclosure inventory rate increased 119 basis points (from 1.28 percent in the first quarter of 2007). Based on a loan type, the foreclosure inventory rate increased across the board-26 basis points for prime loans, 209 basis points for subprime loans, six basis points for FHA loans and 12 basis points for VA loans.

Foreclosure starts rate
Top 5 Lowest			Top 5 Highest
State	Rate		State	Rate
North Dakota	0.23%		Nevada	1.93%
Wyoming	0.27%		Florida	1.86%
Alaska	0.35%		California	1.59%
Montana	0.36%		Arizona	1.33%
South Dakota	0.40%		Michigan	1.26%

 

Foreclosure inventory rate
Top 5 Lowest			Top 5 Highest
State	Rate		State	Rate
Montana	0.72%		Florida	4.61%
Alaska	0.77%		Nevada	4.12%
North Dakota	0.83%		Ohio	4.10%
Wyoming	0.83%		Indiana	3.72%
Washington	0.89%		Michigan	3.61%

source: Mortgage Bankers Association

On a regional basis, foreclosure rates follow previous quarters' trends. The states with high foreclosure rates-Nevada, Florida, California, Arizona-witnessed fast price appreciation, speculative investing and a higher incidence of subprime mortgage origination. By comparison, states with moderate price growth and lower speculation are posting considerably smaller foreclosure rates-North Dakota, Montana, Wyoming, Alaska.

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