Mortgage delinquencies rise
March 2006
Latest data from the Mortgage Bankers Association (MBA) indicate a rise in the delinquency rate for residential mortgage loans in the final quarter of last year.
The data, revealed in the 2005 National Delinquency Survey (NDS), shows that the delinquency rate was 4.70 percent at the end of the fourth quarter, up from 4.38 percent in the fourth quarter of 2004 and 4.44 percent in the third quarter of 2005. Doug Duncan, MBA’s chief economist and senior vice president said that "The effects of Hurricane Katrina in Louisiana and Mississippi are reflected in the overall level of national delinquencies," If the Katrina effect was removed the total delinquency rate would have been 4.55 percent in the fourth quarter.
The Survey also reveals that while loans in the foreclosure process were down 16 basis points from the previous year there was an increase of 2 basis points from the third quarter of 2005. The seasonally adjusted (SA) rate of loans entering the foreclosure process was 0.42 percent in the fourth quarter, down 4 basis points from the previous year and up 1 basis point from the previous quarter.
“The increase in delinquencies is not surprising,” said Doug Duncan, “We have been expecting an up-tick in delinquencies due to a number of factors: the seasoning of the loan portfolio, the increased shares of the portfolio that are ARMs and subprime mortgages, as well as the elevated level of energy prices and rising interest rates.”
Adjustable-rate mortgage (ARMs) delinquencies were higher than fixed-rate loans last year and since 2004 delinquency rates for subprime ARM loans increased, while the rate for fixed-rate mortgage loans fell slightly. Duncan expects market share of adjustable rate mortgages will fall this year due to the narrowing of rates between adjustable and fixed-rate mortgages.
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