Fewer mortgages are in default

By Les Christie, staff writerAugust 26, 2010: 1:31 PM ET

NEW YORK (CNNMoney.com) -- Fewer mortgage borrowers are delinquent on their loan payments, according to the latest data from the Mortgage Bankers Association.

The nation's overall delinquency rate dropped to 9.85% in the second quarter, down from 10.06% of all loans outstanding three months earlier.

Even better, the percentage of seriously delinquent loans -- ones 90+ days late or already repossessed by lenders -- dropped to 9.11% from 9.54% in the first quarter.

The drop in loans 90 days or more late was the biggest the MBA has ever recorded, according to the MBA's chief economist, Jay Brinkmann. "That shows we're making headway," he said.

He cited three reasons for the improvement:

• Fewer loans are coming into the default process;
• The homebuyers tax credit, which increased demand for homes, generated many pre-foreclosure sales, removing the attached delinquent loans from the statistics;
• The government- and lender-led mortgage modifications "cured" some payment problems.

However, even with those bright spots, there was one troubling finding: First-time delinquencies increased after four quarters of decline. It inched up to 3.51% in the second quarter from 3.45% in the first quarter. According to Brinkmann, the reversal reflects the weakness in both the housing market and the overall economy.

"It's a question of jobs," he said. "It takes a paycheck to make a mortgage payment."

Underscoring the trend is the foreclosure trend among borrowers with conventional loans, like 30-year, fixed rate mortgages. They accounted for nearly 36% of foreclosure starts during the quarter. And these safe loans rarely get into trouble unless they lose employment or income.

The four worst hit states -- California, Florida, Arizona and Nevada -- still account for nearly 60% of national delinquencies, but California's numbers dropped dramatically this year. At the end of 2009, California foreclosure starts made up nearly 20% of the nation's total. That dropped to 14.7% during the second quarter.

Another positive trend is the gradual downturn in the number of borrowers who are underwater on their mortgages, owing more than their homes are worth.

CoreLogic reported today that the rate of borrowers underwater dropped to 23% in the second quarter from 24% in the first.

When borrowers fall underwater, it increases the chance that they'll lose the homes. Brinkmann calls it one of the two "triggers" that lead to foreclosure.

If homeowners have positive equity, they can use it as a source of cash to pay bills, including mortgages. But if their cash reserves are gone and they can't afford to make payments because their income has dropped, foreclosure is almost inevitable.

CoreLogic found that negative equity is worst in five states: Nevada (68%), Arizona (50%), Florida (46%), Michigan (38%) and California (33%).

Have you just become delinquent on your mortgage payment? Is it because you lost your job? If so, send an email to and you could be profiled in an upcoming story. Please include a contact phone number. For the CNNMoney.com Comment Policy, .  

#cnnfb_connect {background-color:#f5f5f5;width:auto;height:auto;padding:10px;clear:both;} First Published: August 26, 2010: 12:34 PM ETRight Now

Reading on nation's economic health shows annual growth of 1.6% in second quarter, although slowdown is less than feared. With American concert-goers giving it the cold shoulder, Live Nation is turning to international fans -- with limited success The web can be a great tool for remodeling your home -- if you know the best way to use it. 

Overnight avgs

30 yr fixed mtg	4.36%
15 yr fixed mtg	3.87%
30 yr fixed jumbo mtg	5.45%
5/1 ARM	3.44%
5/1 jumbo ARM	4.27%

Find personalized rates:
 

Rates provided by
Bankrate.com.
Since 1974, Ray's Candy Store has been satisfying New Yorker's taste buds 24 hours a day, 7 days a week. Chris and Chrissy Peplinski are determined to reach the highest credit rating possible: 850 points. Dick Costolo, COO of the micro-blogging site explains how Twitter hopes to one day turn tweets into profit. 

Markets	Last	Change	% Change
	10,150.65	164.84	1.65%
	2,153.63	34.94	1.65%
	1,064.59	17.37	1.66%
	2.65	0.15	6.12%
	1.28	0.00	0.36%

Data as of 4:00pm ET

Company	Price	Change	% Change
	3.76	0.10	2.73%
	12.64	0.17	1.36%
	18.37	0.19	1.05%
	11.56	0.39	3.49%
	20.81	0.11	0.53%

Data as of Aug 27Sponsored by var randomnumberA=Math.floor(Math.random()*2); // fortune content if (location.pathname.match('fortune')) document.write(''); else // moneymag homepage if (location.pathname.match('moneymag')) document.write(''); else // cnnmoney content if (randomnumberA==0) document.write(''); else if (randomnumberA==1) document.write('');
Sections

The proposed merger is expected to close Oct. 1 after the Department of Justice closes an antirust probe. Shareholders to vote Sept. 17.

Obama wants to raise taxes on rich and extend tax cuts for middle class. But some Dems oppose raising taxes -- even on rich -- in a faltering economy.

Paul Allen alleges 11 big companies are using technology he owns.

New York state is ramping up enforcement of its sliced bagel tax.

The financial industry may have recovered from the crisis, but its poor reputation has the the middle class looking for ways to manage their money elsewhere

Please create a screen name to access this feature.

Screen name (Select one with 3-12 characters; Numbers and letters only)

Forgot password

Enter your e-mail address below and we will send you an e-mail with a link and code to reset your password.

E-mail

Password selection

E-mail

Reset code

New password

Log in & let's get started!

E-mail

Password

Remember me for two weeks

Not a member yet?

Sign up or

Screen name

Select one with 3-12 characters;
Numbers and letters only

E-mail

Make sure you typed it correctly.
You will receive an e-mail to validate your account

Password

Make it 6-10 characters, no spaces

Type what you see in the grey box

If you can't read this,
Yes, I would like to receive occasional CNNMoney member updates about new features and special offers.

CNNMoney will use the information you submit in a manner consistent with our . By clicking on "sign up" you agree with and and consent to the collection, storage and use of this information in the U.S. subject to U.S. laws and regulations. ()

For our international users, please be aware that the information you submit when registering for our services is collected in the United States of America. In addition to being subject to our Privacy Policy, the collection, storage, and use of your data will be subject to U.S. laws and regulations, which may be different from the laws and regulations of your home country. By registering for this service, you are consenting to this collection, storage, and use.

We're Sorry!

This service is temporarily unavailable. Please try again soon.

Thanks!

Please check your e-mail and click the link to confirm your membership. Then, you'll be ready to participate in all activities and conversations on our site.

  Add comment

Name:
E-Mail:
Comment:
Enter code: