Compared with the first quarter of 2005, the percentage of loans in the foreclosure process was down 10 basis points and the percentage of loans entering the foreclosure process was down 1 basis point.   The SA delinquency rate was up 10 basis points from one year ago. This quarter's NDS results cover over 41.3 million loans (31.4 million prime loans, 5.6 million subprime loans and 4.3 million government loans).

"The economy grew at a brisk 5.3 percent pace in the first quarter of 2006, and labor markets were quite strong as well, with an average of 176,000 jobs added per month. Within this context, the housing market was normalizing with a declining pace of new and existing home sales, and slowing rates of home price appreciation," said Doug Duncan, MBA's chief economist and senior vice president of research and business development.

"In prior quarters we have indicated a number of factors including the aging of the loan portfolio, increasing short-term interest rates, and high energy prices which are putting upward pressure on delinquency rates.  The strong economy and labor markets are offsetting positive factors that were particularly important in the first quarter. 

"Going forward we expect these same factors will continue to be important, including the fact that the Federal Reserve might need to raise rates further to keep inflationary pressures contained. In any event, additional modest increases in delinquency and foreclosure rates are likely in the quarters ahead," said Duncan.

Change from last quarter (Q4, 2005)
All adjustable rate (ARM) loans and fixed rate (FRM) loans had lower SA delinquency rates as compared with last quarter except for the subprime ARMs.  Since last quarter, the SA delinquency rate for prime ARMs decreased 24 basis points (from 2.54 percent to 2.30 percent), the rate for prime FRM loans decreased 21 basis points (from 2.21 percent to 2.00 percent), and the rate for the subprime FRM loans decreased 9 basis points (9.70 percent to 9.61 percent), whereas the rate for subprime ARMs increased 41 basis point (11.61 percent to 12.02 percent). 

The SA delinquency rate decreased during the first quarter for all loan types, except VA loans. The delinquency rate decreased 22 basis points for prime loans (from 2.47 percent to 2.25 percent), 13 basis points for subprime loans (from 11.63 percent to 11.50 percent), and 95 basis points for FHA loans (from 13.18 percent to 12.23 percent), while increasing 12 basis points for VA loans (from 6.81 percent to 6.93 percent). 

During the first quarter of 2006, the foreclosure inventory percentage decreased for prime loans and FHA loans while the percentage increased for subprime and VA loans. The foreclosure inventory rate decreased 2 basis points for prime loans (from 0.42 percent to 0.40 percent) and 16 basis points for FHA loans (from 2.34 percent to 2.18 percent), while the rate increased 17 basis points for subprime loans (from 3.33 percent to 3.50 percent) and one basis point for VA loans (from 1.13 percent to 1.14 percent).

By loan type, the SA percent of new foreclosures decreased 2 basis points for prime loans (from 0.18 percent to 0.16 percent) and 8 basis points for FHA loans (from 0.91 percent to 0.83 percent), while increasing 15 basis points for subprime loans (from 1.47 percent to 1.62 percent) and 5 basis points for VA loans (from 0.34 percent to 0.39 percent).

In the first quarter of 2006, the percent of loans that were seriously delinquent, which is defined as the non-seasonally adjusted percentage of loans that are 90 days or more delinquent or in the process of foreclosure, was 1.93 percent, 15 basis points lower than for the fourth quarter of 2005.  This measure conforms with a number of standard definitions and is designed to account for inter-company differences on when a loan enters the foreclosure process.

Change from last year (Q1, 2005)
Compared with the first quarter of 2005, prime FRM loans had a lower delinquency rate, whereas prime ARMs, subprime ARMs and subprime FRM loans had higher delinquency rates than last year.  During the first quarter of 2006, the SA delinquency percentage among prime FRM loans decreased 2 basis points, while the rate for prime ARMs increased 24 basis points, the rate for subprime ARMs increased 177 basis points and the rate for subprime FRM loans increased 51 basis points.

Relative to the first quarter of 2005, the SA delinquency rate increased for prime loans, subprime loans and FHA loans, while decreasing for VA loans. The delinquency rate increased 8 basis points for prime loans, 88 basis points for subprime loans, and 50 basis points for FHA loans, whereas the delinquency rate fell 23 basis points among VA loans. 

Compared with the first quarter of 2005, the percentage of loans in foreclosure decreased for all loan categories except subprime: 6 basis points for prime loans, 38 basis points for FHA loans, and 24 basis points for VA loans. Among subprime loans the percentage of loans in foreclosure increased 1 basis point over the year.

Over the last year, the SA percentage of new foreclosures decreased 2 basis points for prime loans, 3 basis points for FHA loans, and 1 basis point for VA loans.  Among subprime loans, the percentage of new foreclosures increased 8 basis points.

In the first quarter of 2006, the seriously delinquent percentage was 4 basis points higher than one year ago. 

Hurricane Katrina Impact on the Statistics
First quarter delinquency percentages include the impact of Hurricane Katrina - higher delinquency rates in Louisiana and Mississippi resulting from the destruction and dislocation caused by the storm.  Delinquency statistics for all loan types were lower once the hurricane effects are eliminated from the first quarter statistics. For example, if the effects of Hurricane Katrina are removed from national statistics the total delinquency rate decreases 39 basis points to 4.31 percent from 4.70 percent in the fourth quarter. This 39 basis point decrease compares with a 29 basis point decrease if the Hurricane Katrina impact is not removed. Table 1 provides a comparison of the first quarter 2006 statistics with and without the impact of Hurricane Katrina.   

The non-Katrina percentages were calculated by using adjusted second quarter 2005 numbers for Louisiana and Mississippi, instead of their first-quarter 2006 numbers. The hurricane's impact has resulted in elevated delinquency rates and may result in somewhat higher foreclosure rates for at least the next few quarters.

If you are a member of the media and would like a copy of the survey, please contact Aleis Stokes at (202) 557-2741 or astokes@mortgagebankers.org.  If you not a member of the media and would like to purchase the survey, please call (800) 348-8653.

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The Mortgage Bankers Association (MBA) is the national association representing the real estate finance industry, an industry that employs more than 280,000 people in virtually every community in the country. Headquartered in Washington, D.C., the association works to ensure the continued strength of the nation's residential and commercial real estate markets; to expand homeownership and extend access to affordable housing to all Americans. MBA promotes fair and ethical lending practices and fosters professional excellence among real estate finance employees through a wide range of educational programs and a variety of publications. Its membership of over 2,200 companies includes all elements of real estate finance: mortgage companies, mortgage brokers, commercial banks, thrifts, Wall Street conduits, life insurance companies and others in the mortgage lending field. For additional information, visit MBA's Web site:  www.mortgagebankers.org.