Jump in Mortgage Delinquencies Signals Housing Slowdown

The 2012 second quarter was a blip in an otherwise downward trend of mortgage delinquencies, according to information from the Mortgage Bankers Association.

The seasonally adjusted delinquency rate for all mortgage loans grew to 7.58 percent during the second quarter from 7.40 percent in the first quarter. It was down on a yearly basis, from 8.44 percent in the second quarter of 2011.

“[The rise in delinquencies] is consistent with the slowdown in the economy during the first half of the year and our stubbornly high unemployment rate,” said MBA chief economist Jay Brinkmann in a press release. “Whether this is just a temporary blip or a sign of a true change in direction for mortgage performance will fundamentally depend on the direction of employment over the remainder of the year.”

For mortgages that were seriously delinquent – 90 days late or more – the delinquency rate increased to 3.19 percent, up from 3.06 percent in the first quarter.

The rate of newly foreclosed loans stalled out in the second quarter however at 0.96 percent, unchanged from the previous quarter and the year before.

“While the rate of new foreclosure filings was unchanged, that rate would have fallen were it not for the considerable jump in foreclosure starts on FHA loans,” said Brinkmann.

He noted that the increase in FHA loan foreclosure activity was due to several of the big banks restarting their foreclosure engines after the ‘robo-signing’ mortgage settlement.

On a regional basis, the states that now have the highest foreclosure levels are mainly those where foreclosures must be reviewed by a judge. Florida had the highest foreclosure rate, at 13.7 percent in the second quarter, while other judicial review states also posted high rates: New Jersey with 7.7 percent, Illinois with 7.1 percent, and New York with 6.5 percent.

Yet some states that have previously claimed the highest foreclosures have seen their rates dip below the national average. Arizona’s foreclosure rate fell to 3.2 percent while California’s rate was down to 3.1 percent.

The MBA’s survey points to trouble for the housing market recovery, as jobs numbers seem to be the biggest factor in delinquencies and foreclosures.┬áSaid Brinkmann,

“I think we’re going to see a general slowdown in housing.”

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