Mortgage Delinquency Rate Hits 10 Percent, Mortgage Applications Plummet
Two reports from the Mortgage Bankers Association today — one mixed, one troubling.
First, mortgage loan applications — measured by the MBA’s purchase index, which includes all mortgage applications for single-family homes — dropped 27 percent week-on-week, to 24 percent lower than a year ago. The news is not quite as terrible as it initially sounds. The precipitous drop is due to the sunset of the Obama administration’s homebuyer tax credits at the end of last month. If you were thinking of buying a house this spring, you would have probably rushed to do so before the tax credit expired; in terms of aggregate sales, it means that March and April have stolen from May and June.
“The data continue to suggest that the tax credit pulled sales into April at the expense of the remainder of the spring buying season. In fact, this drop occurred even as rates on 30-year fixed-rate mortgages continued to fall, and at 4.83 percent are at their lowest level since November 2009,” Michael Fratantoni, an MBA economist, said in a statement. “However, refinance borrowers did react to these lower rates, with refi applications up almost 15 percent, hitting their highest level in nine weeks.” The big question is aggregate housing demand — and all signs are that it is improving, even if it remains weak.
The second report shows that one in ten mortgage holders is now delinquent, meaning late on at least one payment. The first-quarter rate of 10.06 percent is up around 1 percent from a year ago. That is an all-time high. The percentage of loans in foreclosure was 4.63 percent in the first three months of the year, another record high. All in all, around 15 percent of homeowners are either in foreclosure or late on their payments. Before the financial crisis, most financial firms’ asset-backed security models did not factor in levels of delinquency higher than 5 percent. Now, with the foreclosure crisis peaking, we’re talking about numbers three times that predicted upper limit.
One other sour note in the MBA report: States that had relatively stable housing markets are seeing an upturn in delinquencies and foreclosures, implying that the “sand states” of California, Florida, Nevada and Arizona aren’t the only ones banks should worry about.
“The economy has begun to generate jobs and layoffs have declined, although new claims for unemployment insurance remained higher in the first quarter than we expected. The percent of loans behind one payment had been declining as first-time claims for unemployment began falling in March 2009. Those new claims stopped falling during the first quarter of this year, which likely halted the decline in the underlying 30-day delinquency rate. If mortgage delinquencies are not yet clearly improving, it also appears they are not getting worse. However, a bad situation that is not getting worse is still bad.
“For several years, the four states of Florida, Arizona, Nevada, and California have dominated the national delinquency and foreclosure numbers. Florida is still getting worse, but California is showing signs of improvement. However, Washington, Maryland, Oregon, and Georgia showed the greatest overall increases in foreclosures started compared to last quarter,” Brinkmann said.