According to the Mortgage Bankers Association (MBA) of America, mortgage delinquencies climbed 7.88 percent during Q4, the biggest increase since record-keeping began in 1972.
A breakdown of the report shows that delinquencies on prime mortgages rose 5.06 percent in Q4 compared to 4.34 percent in Q3, while subprime mortgage delinquencies surged 21.88 percent. A greater proportion of these delinquencies were attributed to adjustable rate mortgages when compared to fix rate mortgages. Furthermore, inventory foreclosures associated with subprime, adjustable rate mortgages were up a record 22.18 percent, which only highlights the fact that these particular types of mortgages along with lax credit standards were behind the housing market collapse. This is much of the reason why the government has implemented their “Making Home Affordable” program where they will offer incentives to persuade mortgage-servicing companies to modify the loans of borrowers who are deemed as being at risk of foreclosure. The program would allow for mortgage-servicers to lower interest rates as low as 2 percent, extend payment periods, or make other modifications to bring the borrower’s monthly payment down to 31 percent of their income.
MBA Mortgage Delinquencies (Quarterly)
Source: Bloomberg
