By david h. Stevens
PRESIDENT AND CEO, MORTGAGE BANKERS ASSOCIATION
DeliNqUeNcieS AND FOreclOSUreS DOwN TO Pre-receSSiON levelS
Mortgage delinquencies continue to decline, according to this past first quarter’s National
Delinquency Survey, released by the Mortgage Bankers Association (MBA).
The delinquency rate for mortgage loans on one-to-four-unit residential properties decreased
to a seasonally adjusted rate of 7. 4 percent of all loans outstanding as of the end of first-quarter
2012, a decrease of 18 basis points from fourth-quarter ’ 11, and a decrease of 92 basis points
from first-quarter ’ 11. The non-seasonally adjusted delinquency rate decreased 121 basis points
to 6.94 percent this past first quarter from 8. 15 percent this past fourth quarter. This is the
largest quarterly decrease in the unadjusted rate in the history of the survey.
The percentage of loans on which foreclosure actions were started this past first quarter was
0.96 percent, down three basis points from the previous quarter and down 12 basis points
year over year. This is the lowest this measure has been since 2007.
The percentage of loans in the foreclosure process this past first quarter was 4. 39 percent,
up one basis point from the previous quarter but down 13 basis points year over year. The
serious delinquency rate — the percentage of loans that are 90 days or more past due or
in the process of foreclosure — was 7. 44 percent, a decrease of 29 basis points from the
previous quarter and a decrease of 66 basis points from first-quarter ’ 11.
The combined percentage
of loans in foreclosure or
at least one payment past
due was 11. 33 percent on
a non-seasonally adjusted
basis, a 120 basis point
decrease from the
previous quarter and 98
basis points lower than a
year ago. This is the lowest
this measure has been
u.S. hiSTorical delinquency and ForecloSure ra TeS
All past-due loans
Q1 ’07 Q1 ’08
30-day delinquency rate
Q1 ’09 Q1 ’ 10
Q1 ’ 11 Q1 ’ 12
Overall delinquency rates
continue to drop, and the
delinquency rate had its
largest decline in the history of the survey. Short-term delinquencies are down, largely
attributable to recent job growth and a decline in the unemployment rate. Longer-term
delinquencies — loans that are at least 90 days past due — also decreased, and there
was no corresponding increase in loans in foreclosure. This may indicate that those
troubled loans in the gravest danger of entering the foreclosure process are becoming
healthy loans again.
Source: Mortgage Bankers Association
The foreclosure inventory rate is getting worse, however. The discrepancy in the percentages
of homes in foreclosure between judicial foreclosure states — states in which foreclosure
proceedings must be handled through the court systems — and nonjudicial foreclosure
states has been a problem for some time. judicial foreclosure states have an average
foreclosure inventory rate of 6. 9 percent, while nonjudicial foreclosure states only average
2.8 percent. judicial foreclosure states have much higher foreclosure inventory rates than
nonjudicial ones because the latter are able to work through troubled loans much more
rapidly. As a result, these states can begin healing their housing markets faster.
Arizona is a prime example of a state that was hit hard by the housing crash, but because it
is a nonjudicial foreclosure state, it has been able to work through its foreclosure inventory
faster than many other states. Arizona has a foreclosure inventory rate of 3. 57 percent and
began to see home price appreciation this past spring.
In comparison, Florida and New jersey also were hit hard by the crisis, and both are judicial
foreclosure states. They have foreclosure inventory rates of 14. 31 percent and 8. 37 percent,
Overall, the housing picture is improving, albeit at a slower pace than we might want.
Delinquencies and foreclosures are down to pre-recession levels, and the problem remains
the high number of foreclosures, which must be cleared before any real progress can be
made in the return to normalcy in the market.
To subscribe to MBA’s National Delinquency Survey, contact MBAResearch@mortgagebankers.org.
David h. Stevens was president and CEO of the Mortgage Bankers Association. Previously, Stevens served
as assistant secretary for housing at the U.S. Department of Housing and Urban Development and was
appointed commissioner of the Federal Housing Administration by President Obama. Stevens was also
president and chief operating officer of Long and Foster Companies, senior vice president at Freddie Mac,
and executive vice president at Wells Fargo. Reach the MBA at (202) 577-2700.
reed piano MANAGING DIRECTOR NATIONAL ASSOCIATION OF MORTGAGE UNDERWRITERS
BY RAYMOND FLEISCHMANN
The underwriting process is an integral part of every
loan that’s completed in the mortgage industry — from
jumbo loans to Federal Housing Administration loans,
purchase loans to refinances. To learn more about this
vital facet of the industry, we spoke with Reed Piano,
managing director of the National Association of
Mortgage Under writers (NAMU).
What are some of namu’s concerns for the
next few years?
From an underwriting perspective, we just don’t want
to go backward and loosen up the guidelines and allow
for subprime loans, which could take us backward.
I think that, ultimately, having tighter standards is a
good thing, but I think it needs to be balanced out.
Right now, [the standards are] overregulated and
need to be eased up a little bit. So, a concern is that
those regulations don’t get eased and the real estate
mortgage market remains stalled. It needs to be eased
up a little bit, but not to a point where it’s like it was
before the crash.
What can mortgage brokers and originators
do to help their deals get approved?
From an originator’s standpoint, the trick is to package
the deal correctly upfront. The idea is to obtain everything that’s needed from a borrower, so you’re finding
out upfront if the deal is going to be good. That includes
obtaining their credit [reports], having W-2s, getting an
appraisal and making sure all the pieces of the puzzle
are put together. A trend right now, if you want to call it a
trend, is manual under writing. A lot of banks and lenders
have shifted from automated underwriting — which in
some ways is what got us into this problem, underwriters were relying too heavily on automated under writing.
Now, there’s more of an emphasis on manual under writing, which is basically having the skills to pick apart a
file by hand. But I would say, in terms of the broker or
loan officer, the main thing to expedite a closing and increase closing ratios at the end of the month is if they
put together a good package upfront. Then there’s less
chance that it’ll be rejected and fewer stipulations that
come back from the underwriter.
What are some of the most common snags that
originators run into during underwriting?
I would say occupancy and debt-to-income ratios.
Misrepresentation of occupancy happens all the time,
and not disclosing debts that the underwriter finds
throughout the review processes alone can cause
ratios to exceed guidelines. I think the GFE [good-faith estimate] and accurate disclosure of common
mortgage fees and charges continue to challenge
origination staffs. Because, obviously, there’s a
balance there — the originator wants to not scare
off the borrower, but at the same time, they have to
enlighten the borrower upfront. The bottom line is: Be
accurate upfront with the borrower. you might scare
them off, but at the same time, you’re going to close
the loan if it is a good borrower and if the borrower
agrees to the fees.
Raymond Fleischmann is an associate editor at Scotsman Guide.
Reach him at (800) 297-6061 or email@example.com.