The National Mortgage Bankers Association released its 2010 fourth quarter data today, and MBA's economist essentially declared that nationally, the bottom had been reached in mortgage delinquencies:
Jay Brinkmann, MBA’s chief economist said “These latest delinquency numbers represent significant, across the board decreases in mortgage delinquency rates in the US. Total delinquencies, which exclude loans in the process in foreclosure, are now at their lowest level since the end of 2008. Mortgages only one payment past due are now at the lowest level since the end of 2007, the very beginning of the recession. Perhaps most importantly, loans three payments (90 days) or more past due have fallen from an all-time high delinquency rate of 5.02 percent at the end of the first quarter of 2010 to 3.63 percent at the end of the fourth quarter of 2010, a drop of 139 basis points or almost 28% over the course of the year. Every state but two saw a drop in the 90-plus day delinquency rate and the two increases were negligible. ”
“While delinquency and foreclosure rates are still well above historical norms, we have clearly turned the corner. Despite continued high levels of unemployment, the economy did add over 1.2 million private sector jobs during 2010 and, after remaining stubbornly high during the first half of 2010, first time claims for unemployment insurance fell during the second half of the year. Absent a significant economic reversal, the delinquency picture should continue to improve during 2011,” Brinkmann said.
In analyzing this data, we can also note that Colorado continues to improve faster than the nation with its delinquency rate. In numerous comparisons with the national rate, Colorado's delinquencies and foreclosure inventory rates continue to remain well below national rates, and have improved more.
Here I have plotted out the percentages for 30-day delinquencies for each quarter. Note that for the United States, the 30-day delinquency rate for the 2010's fourth quarter has fallen 9.4 percent from the peak reached during the third quarter of 2008. In Colorado, the situation has improved even more, with 30-day delinquencies now down 12.2 percent from the peak reached during the third quarter of 2009.
Interestingly, the 30-day delinquency rat peaks during the third or fourth quarter of each year in recent years. In Colorado in 2010, the rate peaked during the 3rd quarter at 2.55 percent, but fell to 2.44 percent during the fourth quarter, making the fourth quarter the lowest 30-day delinquency rate in three quarters.
In the second chart, we see also see continued declines in the percentage of loans that are either in foreclosure or are 90 days delinquent. Nationally, these loans are now down 11.4 percent from the peak reached during the fourth quarter of 2009. Colorado also improved more than the nation in this measure as these loans have dropped 15.7 percent from their own peak which was also reached during the fourth quarter of 2009.
We see in the third chart, however, that among loans that are either in foreclosure or 90-days delinquent, the downward trend for 2010's fourth quarter was being driven by a drop in 90 day delinquencies. We know this because if we pull out just the loans that are in the foreclosure inventory, the percentage actually increased both nationally and in Colorado from the third quarter to the fourth quarter.
We can conclude that although fresh delinquencies have been declining in recent months, the size of the foreclosure inventory has not decreased as a similar pace. This may be due to the "slowdown" in the processing of foreclosures that was put in place in October by some mortgage companies in response to the "robo-signing" controversy. If fewer foreclosures were being processed through the system and sold at auction, this may have led to an increase in the total amount of loans sitting in the foreclosure process. In other words, even if the rate of new delinquencies was declining, if fewer loans were exiting the process due to the slowdown, this could lead to an increase in total inventory. Nevertheless, the foreclosure inventory in Colorado is still down 9.9 percent from the peak reached during the fourth quarter of 2009. On the other hand, the national foreclosure inventory has hit a new high and is now 1.1 percent above the former peak reached during the first quarter of 2010.