TheTradingReport

The Mortgage Bankers Association (MBA) reported today that mortgage delinquencies hit a record high in the third quarter:

“The delinquency rate for mortgage loans on one-to-four-unit residential properties rose to a seasonally adjusted rate of 9.64 percent of all loans outstanding as of the end of the third quarter of 2009, up 40 basis points from the second quarter of 2009, and up 265 basis points from one year ago, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey. The non-seasonally adjusted delinquency rate increased 108 basis points from 8.86 percent in the second quarter of 2009 to 9.94 percent this quarter.” (For more, click here.)

Unlike the TransUnion report that came out yesterday, the definition of being delinquent is a bit more expansive in this report, covering all mortgages that are at least one payment behind, while the TransUnion report was for mortgages that were at least 60 days overdue (see “Mortgage Delinquencies Still Rising“) but point in the same direction.

The MBA data does not include mortgages that have entered the foreclosure process, and those are rising as well. In the third quarter 4.47% of all mortgages were in some stage of the foreclosure process, up from 4.30% in the second quarter and 2.97% a year ago. The graph below (from http://www.calculatedriskblog.com/) shows the percentage of all prime loans that are in trouble (both fixed and ARMs).

Mortgage delinquencies and foreclosures are no longer just about subprime loans made by shady operators to people living on the wrong side of the tracks. As the late, great Tanta of Calculated Risk put it: “We are all subprime now.”

When people are out of work and without a paycheck, it is very tough to pay your mortgage. The big driver of higher foreclosures now are what was supposed to be the safe stuff — prime fixed-rate mortgages. They represented fully one third of all foreclosures started in the third quarter and 44% of the increase in foreclosures.

Looking a bit further down the troubled mortgage spectrum, they were 54% of the mortgages that were more than 3 months past due, but the banks had not yet started the foreclosure process on them. If one throws in adjustable-rate prime loans (which includes some of the crap like Option ARMs), things look even worse, as their performance is now even worse than that of subprime loans. There was actually a decrease in the rate that subprime loans were going into foreclosure.

The pig is making its way through the python. The FHA has taken over the role that the subprime mortgage brokers used to have, and it is getting much the same results. Eventually, the FHA is going to need a big bailout. While the rate of troubled mortgages is still much higher for subprime than for prime mortgages, there are far more prime mortgages outstanding than there are subprime mortgages.