Delinquencies Going Up for 2nd Mortgages–Down for Firsts

Delinquencies on first mortgages declined slightly between July and June, down from 3.3% of all 1^st mortgages to 3.2%, according to Standard & Poor’s and Experian’s combined index.  The bad news is during the same months delinquencies on 2^nd mortgages rose from 2.4% to 2.8% of all mortgage 2^nd loans.

It is too soon to tell if this is a momentary aberration or a new trend.

A larger study of delinquencies, the Mortgage Bankers Association quarterly survey, came out this past week and the more complete picture looks like this: Foreclosure starts have gone down for the first quarter since 2006.  Loans 90 days or more late have also decreased.

The aberration noted by the MBA is that 30 and 60 day lates are again surging, and it is feared that this may portend another round of higher foreclosure levels in the future.

At the end of the 2^nd quarter 13.97% of all home mortgages were at least one payment overdue or in foreclosure.  That’s $963 billion in troubled home mortgage assets.  The percentage drop from the 1^st quarter was .04%.  The MBA reports that foreclosure starts have dropped for all types of loans, and fell quite substantially, down .12% from last quarter and .25% from the same quarter of 2009.

Forty three states saw an improvement in the foreclosure picture, with the largest drops in California, Florida and Nevada.  Eleven states saw an increase over last year, with the largest increase coming in Illinois, South Dakota and New Mexico.

The 30 day delinquencies are very closely tied to claims for unemployment insurance. When unemployment claims go up, the delinquencies rise; when the claims go down so do the mortgage delinquencies.  Since unemployment claims have begun to rise again it is not unusual that we are also seeing a rise in delinquencies.  The one factor that will bring down delinquencies and ultimately foreclosures will be a substantial drop in the unemployment rates.