One in 7.5 houses with a mortgage in the U.S. is either delinquent or in foreclosure. Does that sound like a recipe for a recovery that Cramer and the rest of the CNBC numbskulls are proclaiming? With 25 million people unemployed, housing prices continuing to drop, and taxes headed higher to fund the Obama agenda, there is no way that we will experience a recovery from here. There is a much greater chance that something bad will happen and plunge us into another period like September of last year. How about a bank run when people realize the FDIC is broke? An electronic bank run could occur in hours.
Prime loans make up 65.5% of all mortgage loans in the U.S. They are going bad like a rocket ship. Foreclosures will not peak until late 2010 at the earliest. Prices cannot stop falling until foreclusures peak. Looks like 2011 for a price bottom. That is a long way off.
WASHINGTON, D.C. (August 20, 2009) — The delinquency rate for mortgage loans on one-to-four-unit residential properties rose to a seasonally adjusted rate of 9.24 percent of all loans outstanding as of the end of the second quarter of 2009, up 12 basis points from the first quarter of 2009, and up 283 basis points from one year ago, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey. The non-seasonally adjusted delinquency rate increased 64 basis points from 8.22 percent in the first quarter of 2009 to 8.86 percent this quarter.
Top Line Results
The delinquency rate breaks the record set last quarter. The records are based on MBA data dating back to 1972.
The delinquency rate includes loans that are at least one payment past due but does not include loans somewhere in the process of foreclosure. The percentage of loans in the foreclosure process at the end of the second quarter was 4.30 percent, an increase of 45 basis points from the first quarter of 2009 and 155 basis points from one year ago. The combined percentage of loans in foreclosure and at least one payment past due was 13.16 percent on a non-seasonally adjusted basis, the highest ever recorded in the MBA delinquency survey.
The percentage of loans on which foreclosure actions were started during the second quarter was 1.36 percent, down one basis point from last quarter and up 28 basis points from one year ago.
The percentages of loans 90 days or more past due and loans in foreclosure both set new record highs, breaking records set last quarter. The percentage of loans 30 days past due is still well below the record set in the second quarter of 1985.
Increases Driven by Prime Fixed-Rate Loans
“While the rate of new foreclosures started was essentially unchanged from last quarter’s record high, there was a major drop in foreclosures on subprime ARM loans. The drop, however, was offset by increases in the foreclosure rates on the other types of loans, with prime fixed-rate loans having the biggest increase. As a sign that mortgage performance is once again being driven by unemployment, prime fixed-rate loans now account for one in three foreclosure starts. A year ago they accounted for one in five. While 41 states had increases in the foreclosure start rate for prime fixed-rate loans, 43 states had decreases in that rate for subprime adjustable-rate loans,” said Jay Brinkmann, MBA’s Chief Economist.
“The states of California, Florida, Arizona and Nevada continue to have a disproportionately high share of foreclosure starts, although the share has fallen slightly from last quarter. Those four states had 44 percent of all of the nation’s new foreclosures during the second quarter of this year, down from 46 percent in the first quarter.
“Florida continues to establish itself as the worst state in the union for mortgage performance, closely followed only by Nevada. In Florida 12 percent of mortgages were somewhere in the process of foreclosure, the highest in the nation, and another 5 percent were at least 90 days past due as of the end of June. A total of 22.8 percent were delinquent at least one payment or in the process of foreclosure, which is almost twice the national percentage if the Florida numbers are excluded. In contrast, the next highest states are Nevada at 21.3 percent, Arizona at 16.3 percent and Michigan at 15.3 percent.
“We also saw a major jump in FHA foreclosures. The percentage of loans with foreclosures started, the percentage of loans in foreclosure and the percentage of loans 90 days or more past due are all records for FHA. While the foreclosure starts rate for FHA loans at 1.15 percent is lower than all other loan types with the exception of prime fixed-rate loans, the FHA percentages have remained low due to a large increase in the number of loans outstanding, the so-called “denominator effect”. If the number of FHA loans had stayed the same as a year ago and we saw the same number of foreclosures, the FHA foreclosure rate would be almost 1.5 percent.
“As for the outlook, it is unlikely we will see meaningful reductions in the foreclosure and delinquency rates until the employment situation improves. In addition, in some areas where a number of borrowers have mortgages that are larger than the current value of their homes, any life events such a divorce or loss of a job are likely to translate into foreclosures until prices in those areas recover, not just flatten.
“Finally, while the various loan modification programs continue to have an impact on holding foreclosure rates below where they otherwise would be, the issue is that many of the foreclosures involve homes that are vacant, borrowers who no longer have jobs, or loans where there was fraud involved. Therefore, in measuring the effectiveness of industry or government loan modification programs it is necessary to compare the results not with the total foreclosure and delinquency numbers reported here but with the smaller subset of borrowers who can and want to qualify,” Brinkmann said.
Change from last quarter (first quarter of 2009)
The seasonally adjusted delinquency rate increased 35 basis points for prime loans (from 6.06 percent to 6.41 percent), 40 basis points for subprime loans (from 24.95 percent to 25.35 percent), and 58 basis points for FHA loans (from 13.84 percent to 14.42 percent), but decreased 15 basis points for VA loans (from 8.21 percent to 8.06 percent).
The percentage of loans in the foreclosure process increased 51 basis points for prime loans (from 2.49 percent to 3.00 percent), and increased 71 basis points for subprime loans (from 14.34 percent to 15.05 percent). FHA loans saw a 22 basis point increase in the foreclosure inventory rate (from 2.76 percent to 2.98 percent), while the foreclosure inventory rate for VA loans increased 14 basis points (from 1.93 percent to 2.07 percent).
The non-seasonally adjusted foreclosure starts rate increased seven basis points for prime loans (from 0.94 percent to 1.01 percent) and increased five basis points for FHA loans (from 1.10 percent to 1.15 percent). This rate decreased 52 basis points for subprime loans (from 4.65 percent to 4.13 percent) and decreased four basis points for VA loans (from 0.72 percent to 0.68 percent).
The seriously delinquent rate, the non-seasonally adjusted percentage of loans that are 90 days or more delinquent, or in the process of foreclosure, was up from both last quarter and from last year. This measure is designed to account for inter-company differences on when a loan enters the foreclosure process.
Compared with last quarter, the non-seasonally adjusted seriously delinquent rate increased for all loan types. The rate increased 74 basis points for prime loans (from 4.70 percent to 5.44 percent), 164 basis points for subprime loans (from 24.88 percent to 26.52 percent), 41 basis points for FHA loans (from 7.37 percent to 7.78 percent), and 27 basis points for VA loans (from 4.42 percent to 4.69 percent).
Change from last year (second quarter of 2008)
On a year-over-year basis, the seasonally adjusted delinquency rate increased for all loan types. The increase was 248 basis points for prime loans, 668 basis points for subprime loans, 179 basis points for FHA loans, and 124 basis points for VA loans.
Compared with the second quarter of 2008, the percentage of loans in the process of foreclosure increased 158 basis points for prime loans and 324 basis points for subprime loans. The rate increased 74 basis points for FHA loans and 74 basis points for VA loans.
The non-seasonally adjusted foreclosure starts rate increased 40 basis points for prime loans, 20 basis points for FHA loans, and 11 basis points for VA loans. The starts rate decreased 13 basis points for subprime loans.
The seriously delinquent rate was 309 basis points higher for prime loans and 867 basis points higher for subprime loans. The rate also increased 235 basis points for FHA loans and 169 basis points for VA loans.