The share of U.S. mortgages that are seriously delinquent plunged to the lowest level in almost five years as improving employment and rising home prices move the foreclosure crisis closer to an end.
The percentage of home loans that were more than 90 days behind or in the foreclosure process fell to 5.88 percent in the second quarter from 7.31 percent a year earlier, the Mortgage Bankers Association said in a report today. That was the lowest since the third quarter of 2008, when it was 5.17 percent.
"It's a dramatic improvement over last year," said Jay Brinkmann, the Mortgage Bankers Association's chief economist, said in a telephone interview today from Washington. "It's not back to where we should be. It's not back to where we were. But it's a major decline."
The housing recovery has given delinquent borrowers a reason to catch up on payments or seek loan modifications as home prices increase at the fastest pace since 2006. The share of U.S. homeowners who owe more than their properties are worth fell to less than 20 percent in the first quarter as values surged in hard-hit markets, according to CoreLogic Inc.
Property prices are climbing as investors and traditional buyers compete for a tight supply of listings. U.S. home prices jumped almost 12 percent in June from a year earlier, the 16th consecutive gain, Irvine, California-based CoreLogic said on Aug. 6. States that were among the most affected by the foreclosure crisis -- Nevada, California, Arizona and Georgia -- had some of the biggest increases.
The serious-delinquency rate is a gauge of shadow inventory, or homes likely to be seized by banks and end up on the market. The percentage of loans in the foreclosure process at the end of the second quarter was 3.33 percent, the lowest since the fourth quarter of 2008, and down from 4.27 percent a year earlier.
While delinquencies and foreclosures are returning to normal in much of the country, northeast states such as New Jersey, New York and Connecticut, which require court approval for home seizures, are falling behind.
The rate of new foreclosures in New York was 1.07 percent in the second quarter, a record in Mortgage Bankers Association data going back to 1979, Brinkmann said. The U.S. average was 0.64 percent.
In Florida, 13.5 percent of loans were seriously delinquent, the highest level in the nation, followed by New Jersey with 12.3 percent and New York with 9.2 percent.
The average rate for loans in foreclosure in judicial states was 5.59 percent, triple the 1.86 percent for nonjudicial states.