A sign of the tighter lending standards enforced since the housing bust, the number of U.S. homeowners behind on their mortgage payments has fallen to the lowest point in over five years, according to new data from the Mortgage Bankers Association (MBA.)
Just 6.41 percent of all home loans were delinquent in the third quarter of 2013, a rate not seen since the 2008 second quarter. The new figure is down from 6.96 percent last quarter and 7.40 percent one year ago. Delinquencies include those loans that are late by at least one payment but not yet in the foreclosure process.
The foreclosure rate also fell, with 3.08 percent of all mortgage loans in some part of the foreclosure process in the third quarter, down from 3.33 percent in the second and 4.07 percent in the third quarter of 2012. The new rate is also a five-year low.
The statistics continue to be skewed by states where the foreclosure process must be reviewed by a judge. “States with judicial foreclosure systems still account for most of the loans in foreclosure,” said Jay Brinkmann, MBA’s Chief Economist and SVP of Research and Education in a press release. “While the percentages of loans in foreclosure dropped in both judicial and nonjudicial states, the average rate for judicial states was 5.28 percent, more than triple the average rate of 1.66 percent for nonjudicial states.
However, the improvement in delinquencies and foreclosures is likely attributed to the higher quality of loans made since the housing crisis in 2008. Borrowers have had to come up with larger downpayments and present higher credit scores and income in the wake of the mortgage meltdown. Case in point: Brinkmann says that about 77 percent of seriously delinquent loans were originated before 2007. That means less than a quarter of loans made in the past six years are in real danger of winding up in foreclosure. The odds are definitely getting better.
“There were major drops across the board,” Brinkmann said in an interview with Bloomberg. “It really speaks to the higher-quality loans that were made more recently. And we’re managing to work through the problems of the past.”