Mortgage Delinquencies Decline Again By RUTH SIMON
In another encouraging sign for the U.S. housing market, mortgage delinquencies fell in March for the second month in a row, according to new data.
The number of mortgage loans that were at least 30 days past due or in foreclosure declined 8.6% in March, according to LPS Applied Analytics, which tracks loan performance. The biggest slide came in loans that were 30 days past due. Such loans fell by a record 342,000 to roughly 1.45 million, a level not seen since spring 2008.
While the number of bank-owned homes rose, the total number of loans that are delinquent or in foreclosure has fallen by more than 647,000 since January, according to LPS. The estimates include loans that carry government backing, those packaged into securities or held by banks.
A "bank owned" sign sits outside a foreclosed home in the Mountain's Edge neighborhood of Las Vegas, Nevada. "We're not out of the woods, but this appears to be a turning point," said LPS Applied Analytics President Ted Jadlos. "This is the first time we've seen improvement across all stages of mortgage delinquency." Still, he said, "we still have a long way to go."
The drop in troubled loans comes amid other signs of improving consumer credit. The portion of credit cards that were at least 60 days past due fell to 2.67% on a seasonally adjusted basis at the end of March from 2.86% at the end of December, according to Equifax Inc. and Moody's Economy.com. Delinquencies also fell for auto and other consumer loans.
There is still plenty of pain left in the mortgage sector. More than 320,000 loans that started the year current were at least 60 days past due at the end of March, according to LPS. More than 3.6 million homes will be lost from 2010 to 2012 because borrowers can't make their loan payments, Moody's Economy.com estimates.
Among other reasons for caution, mortgage delinquencies typically fall in February and March as borrowers get their tax refunds, said Lou Tisler, executive director of Neighborhood Housing Services of Greater Cleveland, which works with financially troubled homeowners. In the Cleveland area, foreclosure filings are on pace to equal the highs of 2008.
The number of borrowers seeking aid also continues to rise. At Consumer Credit Counseling Service of Greater Atlanta, foreclosure-prevention counseling sessions were up 4.7% through March compared with a year earlier. "We're probably seeing, at mortgage-counseling programs across the country, 5,000 to 7,000 new people a week," says Douglas Robinson, a spokesman for NeighborWorks America, which administers the government's national foreclosure-mitigation-counseling program.
Some borrowers are being helped by the Obama administration's foreclosure-prevention program and other modification efforts. Irma Bravo, the owner of a cleaning service in San Diego, recently received a loan workout that lowers the monthly payment on her $522,000 mortgage to $1,736 from nearly $5,000.
"It's a big, big relief," Ms. Bravo says.
Through March, more than 230,000 borrowers have received permanent modifications through the government program, according to the Treasury Department. It isn't clear how many borrowers will remain current once their loan is modified.
But getting a loan workout remains difficult. "There are still a huge number of cases in the pipeline or on hold," said Gabe del Rio, a senior vice president with Community HousingWorks in San Diego, which counsels borrowers facing foreclosure
Flicker of Hope in Subprime Failings By RUTH SIMON For investors looking for a bottom in the troubled housing market, one nascent but significant sign emerged last month: Subprime-mortgage delinquencies dropped for the first time in almost four years.
The share of subprime loans that were at least 60 days past due or in foreclosure fell to 46.3% in March from 46.9% a month earlier, according to Fitch Ratings, which studied the value of loans packaged into securities.
The decline is effectively a rounding error and pales in comparison to the steady increase in delinquencies from their low of 6.2% in 2006. But subprime borrowers were the first to buckle under the weight of their debt—triggering what quickly became a global financial crisis—and an improvement in the sector could be seen as a notable marker in the recovery.
The decline comes amid other signs credit conditions are improving. On Tuesday, J.P. Morgan Chase & Co. reported net income jumped as delinquencies declined and the provision for credit losses fell.
Across the economy, the portion of consumer loans that were at least 60 days past due fell to 3.59% on a seasonally adjusted basis at the end of March, from 3.73% at the end of December, according to Equifax Inc. and Moody's Economy.com. It was the second consecutive decline in delinquencies for mortgages, home-equity loans, credit cards and other types of consumer debt. "Credit quality is improving pretty dramatically across the board," says Mark Zandi, chief economist of Moody's Economy.com.
Some analysts say it is too early to call a turn in the subprime market, noting the portion of troubled loans tends to fall in March and April as borrowers receive tax refunds. "We may be nearing the top, but it's difficult to say whether the seasonal factor is artificially" reducing delinquencies, says Vincent Barberio, a managing director at Fitch. Even if troubled loans are leveling off, the news is hardly heartwarming. In the worst-performing subprime securities, more than 70% of the loans are delinquent, Fitch said.
"The default rates would still have to drop by fifty-plus percent to just get back to an acceptable performance range," says Ted Jadlos, president of LPS Applied Analytics, which tracks loan performance.
There is still plenty of new pain in the mortgage sector. Some 1.14 million loans that started the year current were at least 30 days past due in February, according to LPS, as delinquency rates continued to climb for mortgages made to borrowers with good credit. "You still have seven million loans in some form of delinquency, many of which are not subprime," said Walt Schmidt, mortgage strategist at FTN Financial. More than 3.6 million homes will be lost from 2010 to 2012 because borrowers can't make their loan payments, according to Moody's Economy.com.
While troubled subprime loans played a key role in the credit crisis, the sector's importance to the $10.8 trillion U.S. mortgage market has been waning.
Just $422 billion of the $1.3 trillion in subprime loans packaged into securities from 2004 to 2007 were still outstanding as of March, according to mortgage-bond trader Amherst Securities Group LP. Refinancings reduced the amount outstanding by $670 billion, according to Amherst, while $250 billion in mortgages were liquidated. The issuance of bonds backed by new subprime loans ground to a halt in 2007.