Mortgage Delinquency Rate Record High: 4 Things to Know

New report shows credit quality is deteriorating rapidly.

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In its most recent National Delinquency Survey, released Thursday, the Mortgage Bankers Association reported that the delinquency rate for mortgages on one-to-four-unit homes reached a record high in the fourth quarter, jumping to 7.88 percent of all loans--up more than two percentage points from a year earlier. For the same period, the percentage of loans in the foreclosure process increased 1.26 percentage points to 3.30 percent--another record.

Here are four things you need to know about the jump in mortgage delinquencies:

1. From subprime to unemployment: In a statement accompanying the press release, MBA Chief Economist Jay Brinkmann said that the eroding labor market will become an increasingly key driver of delinquencies going forward. "For example, the 30-day delinquency rate for subprime ARMs continues to fall and is at its lowest point since the first quarter of 2007," Brinkmann said. “[Meanwhile], the delinquency rates continue to climb across the board for prime fixed-rate and subprime fixed-rate loans, loans whose performance is driven by the loss of jobs or income rather than changes in payments."

2. Delinquencies spreading: Brinkmann also noted that the report showed that spikes in mortgage delinquency rates are popping up in states less frequently associated with the housing boom. “While California, Florida, Nevada, Arizona and Michigan continue to dominate the delinquency numbers, some of the sharpest increases we saw last quarter in loans 90 days or more delinquent were in Louisiana, New York, Georgia, Texas and Mississippi, signs of the spreading impact of the recession,” he said.

3. Not so silver lining: Economists at Goldman Sachs pointed out that one data point that may appear at first to be a silver lining--the rate of new foreclosures remaining flat--most likely isn't. "Over the past few months, a number of states have enacted moratoriums on [foreclosures]," the economists said. "This likely held the number down, but is not a real improvement."

4. Obama solution?: After rolling out the details of its ambitious anti-foreclosure effort Wednesday, the question becomes: can the Obama administration halt this surge in mortgage delinquencies? Mike Larson of Weiss Research isn't so sure. "Previous foreclosure prevention efforts have had a spotty record, with many loan modifications simply postponing the inevitable," Larson said in a report. "It remains to be seen whether the latest plan will suffer the same fate."

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