Mortgage delinquency rates surged in Q3, jumping 47 bp to 5.59%, its highest rate since Q2 1986. The increase was broad-based. Prime loans rose 39 bp to 3.12%, while subprime jumped 149 bp to 16.31%, the highest levels since at least 1998. Not surprisingly, adjustable subprime loans fared the worst, rising 186 bp, the most since Q1 2001, to 18.81%. Mortgage delinquencies are up 92 bp over a year ago.
Foreclosure starts also escalated, rising 13 bp to a record high 0.78%, 43% of which were subprime ARMs. That brought the percentage of loans in foreclosure to 1.69% from 1.40%, also the highest ever. Seriously delinquent loans, those that are 90 days or more overdue plus those in foreclosure, jumped 44 bp to 2.95%. Foreclosures were most prevalent in a handful of states, including the overbuilt speculative Florida and California markets, as well as the economically depressed Ohio and Michigan.
We expect delinquency rates and foreclosures to continue to rise in the coming quarters, as they typically lag market turns. ***** (NOTE: lag market turns)
Adjustable resets and foreclosures have caused the ARMs share of mortgage loans serviced to fall to just 22.3%, the fewest since Q4 2004.
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