Both the rate of delinquencies and the share of residential mortgage loans in foreclosure dropped during the third quarter, while the percentage of loans on which foreclosures were started rose.
The seasonally adjusted rate of delinquent one- to four-unit residential mortgage loans stood at 9.13% at Sept. 30, down 72 basis points from the second quarter and 51 basis points from the third quarter of last year, according to data released Thursday by the Mortgage Bankers Association.
The percentage of loans in the foreclosure process at the end of the quarter was 4.39%, down 18 basis points from the previous quarter and 8 basis points from the year earlier, the MBA said.
Meanwhile, foreclosures were started on 1.34% of mortgage loans, 23 basis points more than in the previous quarter but down 8 basis points from a year earlier. Foreclosure starts increased on all loan types, the MBA said, and set a record on prime, fixed-rate loans.
Michael Fratantoni, the MBA's vice president of research and economics, attributed the increase in foreclosures on prime, fixed-rate, "plain-vanilla" loans primarily to the high unemployment rate, which currently stands at 9.6%.
"Most often, homeowners fall behind on their mortgages because their income has dropped due to unemployment or other causes," he said in a press release.
The increase also speaks to the changing composition of the mortgage market, he said. Prime, fixed-rate loans and Federal Housing Administration loans make up nearly 80% of loans outstanding that are included in the survey, and they account for more than half of the foreclosures started during the quarter, compared with 39% a year earlier.
Subprime and prime adjustable-rate mortgages now make up much smaller proportions of overall loans.
The MBA's quarterly survey encompasses about 44 million loans, or roughly 88% of all the first-lien mortgages outstanding in the U.S.
The robo-signing scandal this fall, and the subsequent temporary moratoriums on foreclosures adopted by many large servicers, did not have a profound impact on the third-quarter numbers, Fratantoni said during a call with reporters Thursday. Instead, the effects of those moves will probably be felt more in the quarters to come.
Fratantoni said efforts by servicers to modify loans have helped some homeowners but not "made a significant dent in the overall problem." The redefault rate is still considerably high on modified loans, he said, meaning delinquency and foreclosure rates are likely to remain elevated for some time.
