Roll Rates Steadying?

NEW YORK-Since the 1970s, the share of loans that are 30 days late during one quarter that roll into foreclosure during the following quarter has risen steadily - until recently, when roll rates began to skyrocket. But now they may be steadying.

Jay Brinkmann, chief economist at the Mortgage Bankers Association, said he is uncertain as to where roll rates are headed. The most recent quarterly data from the MBA showed a slight decline in the share of delinquent loans rolling into foreclosure, probably reflecting increased efforts among servicers to keep troubled borrowers in their homes.

Today, about 35% of loans that are 30 days past due during one quarter are subject to foreclosure proceedings in the following quarter. That's up from about 5% in late 1979. And during the 1990s, the roll rate fell in a range of between 10% and 15%.

In a conference call with reporters, Mr. Brinkmann said that high roll rates in California and Florida, as well as in Nevada and Arizona, are driving the dramatic increase. In recent quarters, roll rates in California and Florida have exceeded 60%.

In most areas of the country, including the economically struggling Upper Midwest, roll rates have risen but not as dramatically as in states that experienced a housing boom amid high volumes of nontraditional lending.

"I don't know if the rest of the country is going to follow more of a Michigan example or how much closer we are going to be to the California model," Mr. Brinkmann said.

This recession is different from previous ones because the housing sector entered the recession already weakened, he said. In the past, housing usually entered a recession strong and suffered as a result of the recession.

On the bright side, Mr. Brinkmann said low mortgage rates should bolster origination activity. The MBA projects that the 30-year, fixed-rate mortgage contract rate will average 5.1% in 2009. The MBA predicts that lenders will originate $1.9 trillion of home loans this year, up from about $1.8 trillion in 2008.

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