Serious Mortgage Delinquencies at Lowest Since 2008

By Sari R. Updated on 11/15/2012

The rate of seriously delinquent U.S. mortgages fell to its lowest rate since 2008 today due to an employment improvement and the recovering housing demand.  The amount of home loans that are ninety or more days behind in the foreclosure process dropped to 7.03% in 3Q from 7.31% in 1Q.   A year ago, the rate was 7.89%. 

Homeowners who are currently delinquent have been catching up on payments or finding other methods to foreclosure thanks to the improving economy.  This is reducing shadow inventory and limiting the probability that distressed properties will inundate the market and depress prices.  The shadow inventory drop presents a real advantage for the housing market because it reduced backlog concerns.  The percentage of loans currently in the foreclosure process at the end of 3Q was 4.07%; this represents the biggest record drop since 1979.

In September, the unemployment rate dropped to 7.8%, allowing many borrowers to make monthly payments.  HARP is also allowing Americans with minimal home equity to refinance, and delinquent homeowners who want to sell their homes are finding it very easy because the housing supply is still tight.  In several areas, property inventory levels have caused buyers to buy anything that comes onto the market at an increased rate.  In September 2012, 2.32 million homes were on the market, which was 20% less than a year ago. The inventory decline is boosting home selling prices since buyers are competing for properties.

Overall, the U.S. mortgage delinquency rate dropped to 7.4% down from 7.5% over the last three months.  States that don’t require approval for foreclosures (such as Arizona and California) have been seeing a large delinquency improvement.