Less People are Paying their Mortgages Late

The mortgage delinquency rate in the U.S. declined in the first quarter to its lowest level since 2008. It is believed that this is due to the improving job market, which is helping more individuals pay their bills on time. Additionally, tighter lending standards have led to fewer defaults, which may in turn lead to a decrease in filing bankruptcy.

In the last three months the share of home loans at least 30 days late dropped from 7.58% to 7.4% according to the Mortgage Bankers Association. The 30-day late rate peaked at 10.1% in the first quarter of 2010. It has not been lower since the third quarter of 2008, when it was 6.99%. The decrease in delinquencies may help lower foreclosures and help the housing market recover. Low interest rates, combined with decreased prices, should increase demand in the housing market.

Housing affordability also reached a new high in the first quarter of 2012 and sales of previously owned homes rose 5.3% from a year earlier according to the National Association of Realtors. Additionally, housing starts, which is new home construction, increased 2.6% to an annual pace of 717,000 in April. This was higher than what analysts expected. This also points to the sign that the real estate market is getting stronger.

The U.S. unemployment rate also fell in April to 8.1%, which is the lowest it has been since January of 2009. Additionally, rates for 30 year fixed loans dropped to a record 3.83% in the week ending May 10th, according to Freddie Mac.

Most troubled loans originated between 2005 and 2007. Stricter lending standards and decreased prices for borrowers who obtained mortgages after the housing market collapsed account for the better performance of loans that have orginated since 2008. Statistics shows that most borrowers experience late payments in the first three or four years of a loan, so it is anticipated that the worst of the foreclosure crisis has probably passed.

Lenders usually begin the foreclosure process when loans are more than 90 days overdue. The percentage of loans more than 90 days overdue fell to 3.06% from 3.11% in the first quarter of 2012 and from 3.62% a year ago. However, the share of homes that had received a foreclosure notice but had not yet been seized by banks increased to 4.39%, up 0.01% from the previous quarter.

The foreclosure process has been slowed by mortgage servicers since the fourth quarter of 2010, when they faced allegagtions of using impropoer and fraudulent paperwork to repossess homes with delinquent mortgages. The five largest servicers reached a $25 billion settlement with state and federal regulators in February. Foreclosure starts decreased in 41 states and the rate of loans in foreclosure fell in 22 states. Please leave any questions or comments you my have.