Drop in Rate of Overdues Did Not Boost Optimism

Fourth-quarter delinquency rate datas show slight overall improvements and reiterate the drivers of change are staunchly local and not that promising for the near future.

The delinquency rate of one-to-four unit residential properties was at 8.22%, a 91 basis point improvement compared to the previous quarter or a 125 bp drop on an annual basis, according to the Mortgage Bankers Association’s 4Q10 National Delinquency Survey.

The report states the housing market has “clearly turned the corner” even though delinquency and foreclosure rates remain “above historical norms.”

Nonetheless, and in line with most market insiders, MBA’s chief economist Jay Brinkmann and vice president for single-family research Mike Fratantoni did not sound that optimistic during a recent press conference.

And many would agree.

According to calculations made by National Mortgage News (MBA lists late payments separately from foreclosures), since mortgage bankers of all different charters service $9.8 trillion of one-to-four family loans, up to $806 billion of all outstanding mortgages are 30 days or more late.

TransUnion’s fourth-quarter mortgage loan delinquency data also shows that while the ratio of borrowers 60 or more days past due decreased for the fourth consecutive quarter at the end of 2010, to 6.41%, it is significant the 0.47% decrease from third quarter of 2010 is the smallest decline in mortgage delinquency since the recession ended in the summer of 2009.

Among others, says TransUnion’s group vice president of the U.S. housing market, Tim Martin, falling real estate values and the influx of foreclosures on the market indicate mortgage delinquency rates will remain flat or edge up in the beginning of 2011 and not only in the traditionally worst-performing states.

Data consistently show the delinquency and foreclosure story is local and unpredictable at that.

For example, the MBA delinquency rating places Mississippi at the top with 13.3% of all loans past due mainly due to 30-day-past-due loans, or new delinquencies—yet the phenomena is not that new.

Fratantoni argues that while “there is no clear explanation to what is going on there” the usual drivers are the local unemployment rate and the mix of loan types, such as a higher subprime or FHA share “that typically lead to a higher 30- or 90-day delinquency rate.”

Nonetheless, Brinkmann recalls that even back in 2005 and before the Hurricane Katrina effect, Mississippi ranked among the highest delinquency rate states.

“So it’s something that we have seen traditionally.”

It means the current economic factors are affecting other nonperforming markets in different ways.

At 12% Nevada—the worst-performing state during the past several years that has consistently topped delinquency rating reports—is the second-worst-performing state, followed by Georgia’s 11.89%.

Seven other states reported over 10% of all loans were past due anywhere between 30 days and 90 days: Tennessee 10.74%, Michigan 10.57%, Alabama 10.42%, Louisiana 10.39%, Indiana 10.16%, and Maryland and Florida 10.11%.

The other two worst-performing states of recent years, Arizona and California, scored relatively better at 9.53% and 9.15%, respectively.

TransUnion also reported that while mortgage borrower delinquency rates in the fourth quarter of 2010 continued to be highest in Nevada at 14.76% and Florida at 14.5%, “unlike recent quarters” 33 states showed increases in delinquency from the previous quarter.