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Consumers' mortgage problems continue to recede nationwide

September 8, 2017

One of the biggest positives in the housing market over the past several years is that, as the economy slowly improved, so did any of the most common issues observed in the lead-up to and immediate wake of the recession. Problems like delinquency, default and even mortgage defects continue to recede as the housing market and broader economy strengthen simultaneously, and that's a trend that could continue for some time to come.

"Mortgage delinquency slipped to just 4.24%."

In the second quarter of the year, the rate of delinquency on mortgages for properties of between one and four residential units slipped to just 4.24 percent on a seasonally adjusted basis, according to the latest National Delinquency Survey from the Mortgage Bankers Association. That was down from 4.71 percent in the first quarter, as well as 4.66 percent on an annual basis. This included all mortgages that were at least one payment behind, but even more serious delinquency was also on the decline.

Indeed, home loan payments that were at least 90 days (including foreclosures) behind also dropped - albeit more marginally - to a level of 2.49 percent from the previous quarter's 2.76 percent, the report said. Meanwhile, the serious delinquency rate declined from 3.11 percent a year earlier. 

"In the second quarter of 2017, the overall delinquency rate was at its lowest level since the second quarter of 2000," said Marina Walsh, MBA vice president of industry analysis. "The foreclosure inventory rate was at its lowest level since the first quarter of 2007. In addition, the seriously delinquent rate, which combines loans that are 90 days or more past due with those loans in the process of foreclosure, dropped to a ten-year low."

A closer look at foreclosures
In fact, the trend toward on-time mortgage payments and the fevered buying pace seen in the summer months brought the national foreclosure inventory to the lowest level seen since the start of the housing market's downturn, according to the latest data from Black Knight Financial Services. Total inventory slipped to 398,000 in July, down 28 percent in just the previous 12 months.

"The foreclosure inventory slipped to 398,000 in July."

Meanwhile, the number of homes that entered the foreclosure process in July was at the second-lowest level seen since 2005, beaten out only by April's level earlier this year, the report said. However, early-stage delinquency - which can lead to foreclosure further down the line - did grow slightly during this period.

Other mortgage problems ebbing
Meanwhile, mortgage defects - which include fraud, misrepresentation and mistakes - fell as well in July, dropping 20 percent on an annual basis and reversing a trend of seven straight months in which increases to this type of mortgage risk rose, according to the latest First American Loan Application Defect Index. Moreover, that number was down 17.6 percent from the all-time high for mortgage risk, observed in October 2013.

With these issues in mind, it's important for would-be buyers to remember that declining instances of foreclosure could lead to fewer low-cost options for a home purchase. That, in turn, may require them to continue building their down payments.




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