Mortgage Delinquencies Fall to Four-Year Lows

May 16, 2012 Updated: May 16, 2012

NEW YORK—U.S. mortgage delinquency and foreclosure rates have fallen to their lowest levels since 2008, according to a new Mortgage Bankers Association (MBA) report released on Wednesday.

MBA’s report indicated that 7.4 percent of mortgages on 1 to 4-unit residence properties were past due (30 days late on payment) at the end of the last quarter, which was a decrease from the 7.58 percent at the end of last year. At the peak in 2010, that rate was 10.1 percent.

That’s the good news. The bad news is that foreclosures across the nation remain high, with 4.4 percent of all homes in the process of being repossessed by lenders. This rate is roughly in line with the ratio at the end of December, but is lower than the 4.5 percent during the first quarter of 2011.

Taking both figures into consideration, the U.S. real estate sector is showing signs of improving, especially the bit regarding lower delinquency rates. Delinquency rates are a direct contributor to foreclosures.

“Mortgage delinquencies normally fall during the first quarter of the year, but the declines we saw were even greater than the normal seasonal adjustments would predict, so delinquencies are clearly continuing to improve,” said MBA Vice President of Research and Economics Michael Fratantoni in a statement.

“The percentage of loans three payments or more past due, the loans that represent the backlog of problems that still need to be handled, is down to the lowest level since the end of 2008. Foreclosure starts are at their lowest level since the end of 2007,” he said.

Housing Starts Increase

Housing starts, or permits for new buildings, increased in April by 2.6 percent to 717,000, according to a separate report by the U.S. Department of Commerce on Wednesday. It is another sign that builders are becoming more optimistic.

Builders have applied for permits at an increasing rate since last fall, as demand for new homes increased, partially due to consumers looking to take advantage of historically low mortgage interest rates.

Recent job gains have also contributed to the trend, as the official national unemployment rate fell to 8.1 percent in April.

MBA is a Washington-based trade group representing loan originators.

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