The Mortgage Bankers association is out with some more data on the state of the mortgage market, and it is not a pretty picture. Get it out of your mind that it is a 'sub-prime' problem. It is more an adjustable rate problem, regardless of Prime/Alt-A/sub-prime status. And obviously, this spells more bad news for Fannie Mae (FNM), Freddie Mac (FRE) and Countrywide (CFC).
The overall mortgage delinquency rate rose to 5.59% from 5.12% in Q2 2007 and 4.67% in Q3 2006. This is the worst late payment rate going all the way back to 1986.
We expect these numbers to continue to rise. The subprime delinquency rate jumped again -- to 16.31% from 14.82% in Q2 2007 and 12.56% in Q3 2006. But it's NOT just subprime loans that are souring. The prime delinquency rate rose to 3.12% from 2.73% in Q2 2007 and 2.44% in Q3 2006.
The worst deterioration was evident in adjustable rate loans. Prime fixed-rate mortgage delinquencies only rose to 2.54% from 2.25% quarter-over-quarter, while prime ARM delinquencies jumped to 5.14% from 4.15%.
Meanwhile, the delinquency rate on FHA loans climbed to 12.92% in the third quarter from 12.58% in Q2 2007 and 12.8% in Q3 2006. The delinquency rate on VA mortgages rose to 6.58% from 6.15% in Q2 2007 -- but was unchanged from 6.58% a year earlier. In terms of delinquencies, the hardest hit states were Mississippi at 10.6%, followed by Michigan (8.34%), Georgia (7.93%) and Indiana (7.88%). Several western states had the lowest DQ rates, including Hawaii (2.68%), Montana (2.79%) and Oregon (2.82%).
The foreclosure picture was not any better. The percentage of mortgages entering the foreclosure process climbed to 0.78% in Q3 from 0.65% in Q2 and 0.46% a year earlier. That's a 69% increase, folks. The percentage of overall loans in any stage of foreclosure climbed to 1.69% from 1.4% in Q2 and 1.05% a year earlier, a 61% rise.
These are the worst readings on record. Keep in mind that there are approximately 51 million homes with mortgages in the U.S. Thus there are already over 860,000 homes in some stage of foreclosure.
The worst of the ARM resets are ahead of us. Foreclosure inventory was the worst in Ohio (3.72%), Indiana (3.28%) and Michigan (3.07%). Florida was also relatively high at 2.19%, with Illinois (2.15%) and Nevada (2.15%) not far behind. The estimates that are routinely thrown around now -- two million foreclosures by the time this is all said and done -- look extremely conservative.
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