Real estate foreclosures down nationwide

But Hurricane Katrina will cause delinquency uptick soon, MBA says
Inman News
Mortgage foreclosures fell in the second quarter of 2005 compared to the same time period last year, thanks to an improving economy, though late house payments increased slightly compared to 2005’s first quarter, a mortgage survey today revealed.

At the end of the second quarter, the percentage of loans in the foreclosure process was 1 percent, down 18 basis points from the previous year and down 8 basis points from the first quarter of 2005, the Mortgage Bankers Association’s 2005 second-quarter national delinquency survey reported.

Because of Hurricane Katrina, the MBA expects an uptick in delinquency rates over the next few quarters, especially in Louisiana and Mississippi, Doug Duncan, MBA’s chief economist, said in a conference call.

The chief economist expects the first effects of Katrina on delinquencies to be seen in the 30 to 59 days delinquent category reported in the third quarter, with more complete impacts reflected in fourth quarter numbers.

A maximum of 360,000 mortgage loans could be affected by destruction or job loss created by Katrina, Duncan said. The association doesn’t know how many of those loans actually will be affected, and more information isn’t currently available in the wake of the storm, the chief economist said.

There’s a silver lining in Katrina’s storm clouds, however, according to Duncan. While unemployment will rise in the near term because of Katrina-associated job losses, and housing will decline, Duncan expects a housing rebound in 2006. Indeed, the MBA expects economic growth to increase in 2006, fueled by governmental and private outlays to rebuild the shattered Gulf Coast.

Overall, the economist said, the economic outlook is positive.

”Our general outlook is continued economic strength. We expect employment growth within 180,000 to 200,000 per month,” Duncan said.

”Housing will remain strong,” Duncan predicted. ”There will be a temporary slowing from the effects of Katrina, followed by a rebound. We did expect a slowing in 2006, but that may not be as much as expected because of Katrina.”

Late payments on mortgage loans stood at 4.34 percent at the end of the second quarter, down 22 basis points from the second quarter of 2004 but up 3 basis points from the first quarter of this year, the MBA said.

”The U.S. economy grew at almost 33 percent in annualized real terms during the second quarter of 2005, adding 205,000 payroll jobs per month,” Duncan said.

”Combined with the low-interest environment, consumers improved their household payments, and the percentage of homeowners making their mortgage payments on time increased to nearly 96 percent,” Duncan commented.

In general, the survey said, the seasonally adjusted delinquencies for adjustable rate and fixed rate mortgages are down from last year and last quarter. Over the year, the seasonally adjusted rate for prime adjustable-rate mortgage loans is down 7 basis points, from 2.26 percent to 2.19 percent. The percentage among fixed rate mortgage loans decreased 9 basis points, the study said, from 2.11 percent to 2.02 percent.

The MBA has conducted the National Delinquency Survey on a quarterly basis since 1953. The survey covers more than 38 million loans, representing more than 80 percent of all first-lien residential mortgage loans in the United States.