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Mortgage Market Makes Amends Causing Foreclosure Data to Improve

May 23, 2011 6:28 PM ET
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A  lower number of mortgages were in foreclosure or delinquent for the first quarter, in accordance with the data that was released by the Mortgage Bankers Association last week.

In the group’s National Delinquency Survey, it was stated that 12.31% of mortgages were in foreclosure or were at least one payment past due for the first quarter, a decline from 13.6% in the fourth quarter, on a non-seasonally adjusted basis. For the first quarter of 2010, the collective percentage of the mortgages either in foreclosure or in delinquent was 14.01%.

In the meantime, the percentage of mortgages somewhere in the process of foreclosure was 4.52% for the first quarter, decreasing from 4.64% in the fourth quarter and 4.63% from a year ago.

“Most of these numbers continue to point to a mortgage market on the mend,” said Jay Brinkmann, MBA’s chief economist, in a news release. He also stated that the numbers continue to be heavily influenced by states with substantial foreclosure difficulties.

The MBA survey covers approximately 43.6 million mortgages on 1 to 4 unit residential properties. This represents 88% of the total number of outstanding first-lien mortgages.

In a conference call conducted with reporters, Birkmann stated that the market is “not healed yet, but things are looking better than last year or the year before.” This is primarily because of job creation and certain improvements in the economy. If these trends continue, Brinkmann has expected to see continuous improvement in the mortgage market.

“Short-term delinquencies remain at pre-recession levels,” he said in the release. “Foreclosure starts are at the lowest level since the end of 2008 and had the second largest drop ever. The percentage of loans somewhere in foreclosure is down from last quarter’s record high and also had one of the largest drops we have ever seen, although the reasons for the drop will differ from market to market,” he said.

Brinkmann also brought light to the fact that mortgages 90 days or more delinquent have declined for five consecutive periods. Mortgages in the delinquency category are currently at their lowest level since 2009 – and the decline was mainly driven by the improvements in mortgages that have originated between 2005-2007.

“These are the loans that drove the mortgage market collapse and now represent about 31% of loans outstanding but 65% of the loans seriously delinquent. Given that loans originated during this period are now past the point where loans normally default, and that loans originated since then generally have better credit quality, mortgage performance should continue to improve,” Brinkmann said.

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