U.S. Mortgage Delinquencies Edge Down

Fewer people fell behind on their home-mortgage payments in last year's fourth quarter, a sign that the default crisis may be peaking, the Mortgage Bankers Association reported Friday.
By: JAMES R. HAGERTY: wsj.com
Separately, the Obama administration announced plans to provide $1.5 billion to housing agencies in five states hit hardest by the crisis that would fund programs to help people avoid foreclosure.

The trade group said 3.63% of mortgage borrowers were between 30 and 59 days overdue in the fourth quarter, down from 3.79% in the third quarter, based on its quarterly survey of lenders. Normally, that rate rises in the fourth quarter as heating bills and holiday expenses cause some people to fall behind.

The decline in this category of newly delinquent borrowers reflects a drop in the number of people losing their jobs, said Jay Brinkmann, the MBA's chief economist.

But the overall number of people in trouble with their mortgages—those behind on payments or in the foreclosure process—continued to grow. At the end of the fourth quarter, 15% of home loans on one-to-four-family homes were in that category, up from 11% a year earlier. For the latest quarter, that equates to about 7.8 million households.

"We have fewer problems coming into the system," Mr. Brinkmann said. But "we still have a big problem we have to deal with."

The overall number continued to rise because people delinquent on their loans are staying in their homes longer before losing them to foreclosure. Lenders are overwhelmed with paperwork from foreclosure cases. At the same time, federal and state programs aimed at saving many borrowers mean that lenders are going through lengthy procedures to determine which people are eligible for easier loan terms. While waiting to be helped or evicted, many people don't make payments.

Some borrowers say they have trouble getting in touch with employees at lenders and often are asked to provide the same documents repeatedly.

About 2.9 million households are 90 days or more behind on payments, but not yet in foreclosure, nearly triple the total of two years ago, according to LPS Applied Analytics, a data provider. On average, those households are nine months behind on payments.

There is no guarantee that the number of households newly behind on payments will continue to shrink. LPS, which uses separate data from lenders, estimated that 3.4% of borrowers were 30 to 59 days behind in January, up slightly from 3.3% in December.

The default problem is largely concentrated in states hit hardest by falling home prices—Arizona, California, Florida, Nevada and Michigan. Those are the states that are designated to get portions of the latest $1.5 billion federal program, dubbed Help for the Hardest-Hit Housing Markets.

Those funds will be awarded to state and local housing-finance agencies that propose programs meet federal criteria. The money is to be spent helping unemployed homeowners and those whose home values have dropped far below the amount they owe on their mortgages.The administration said the agencies "may experiment with programs that would assist borrowers to negotiate with lenders to write down mortgages."

The money also can be used to help resolve problems arising from home-equity loans and other second-lien mortgages; in such cases, conflicts between the holders of the first- and second-lien mortgage often stymie efforts to work out a plan to lower payments. In addition, the funds could go to "other programs encouraging sustainable and affordable homeownership," the administration said.

The funds will come from the federal Troubled Asset Relief Program. Administration officials said they believed state and local housing agencies could design relief programs tailored to local needs.

The new program is the latest in a wide array of federal efforts to prop up the housing market, including the $47 billion Home Affordable Modification Program, known as HAMP, which gives lenders incentives to reduce payments for struggling borrowers. That program, launched a year ago, is often criticized for failing to do enough for people who have lost their jobs or owe far more than the current value of their homes.