Job Growth, Though Modest, Slows Mortgage Delinquencies.

By Nick Timiraos

The number of U.S. households delinquent on their mortgage payments fell below 8% in the third quarter on a seasonally adjusted basis, down from 9.1% one year ago to the lowest level since the end of 2008, according to the Mortgage Bankers Association.

Around 4.4% of all households were in some stage of foreclosure, a number that is essentially unchanged over the past year.

The share of mortgages that had missed one payment during the third quarter fell to 3.2%, down from 3.5% last quarter to the lowest level in more than four years.

The decline in delinquencies is good news for the housing market and the economy. It follows a surprise uptick earlier this year that had raised concerns that the mortgage crisis was worsening.

The numbers are “reflecting that fact that we are continuing to get positive job growth” even though unemployment remains high, said Michael Fratantoni, vice president of research for the MBA.

Assuming the economy doesn’t sputter, “we’ll continue to see very gradual improvement in the delinquency rate,” he said. The housing market is at least three to four years away from moving towards a foreclosure rate that is closer to the historical 1% average. While “we’re on the downhill side of the mountain now,” he said, “we still have a long way to go.”

The data continue to show how state-specific foreclosure processes are increasingly determining the rate at which states clear their backlog of bad loans. States that require banks to process foreclosures by going to court tend to have larger foreclosure inventories than so-called “non-judicial” states.

In Florida, more than 14% of all mortgages were in foreclosure. That state has long led the nation in problem loans and had one of the biggest housing booms and busts.

But New Jersey, a state that didn’t have nearly as dramatic a building boom, had the second highest foreclosure inventory, above 8%, ahead of Nevada, which has had the highest rate of delinquent mortgages. Nine of the 10 states that exceeded the national average in foreclosure inventory are judicial states.

URL to original article: http://blogs.wsj.com/developments/2011/11/17/mortgage-delinquencies-decline-in-the-third-quarter/

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