New Data on Delinquencies and Foreclosures, and New Details on the Obama Mortgage Plan

by Amy Lillard


Loan delinquencies rose to record-breaking levels in 2008, but new data show foreclosure rates may be staying put. With new details about Obama’s mortgage modification plan emerging, economic experts and homeowners alike are hoping the plan will point the way towards reduced foreclosures and loan relief.

The percentage of delinquent loans in the fourth quarter of 2008 broke the longstanding record, according to the Mortgage Bankers Association's quarterly delinquency survey released on Thursday. Loans at least 30 days past due rose to 7.88% on a seasonally adjusted basis. Jumping from 6.99% in the third quarter, the increase was the biggest jump since the MBA survey began in 1972.

Loans that are either in the foreclosure process or at least one payment past due totaled a seasonally adjusted 11.18%, the highest ever recorded in the survey.

The survey cited several reasons for the increasing figures, including the rise in unemployment due to layoffs, and the deepening recession. The hardest-hit states continue to be California, Florida and Nevada. Some key states have seen sharp increases in delinquencies, including Louisiana, New York, Texas and Georgia.

Some good news does exist, however. The rate of new foreclosures has remained essentially stagnant. The rate of mortgages entering the foreclosure process, which hit 1.08%, has stayed basically flat for the last three quarters of 2008. According to the MBA’s chief economist, servicers are delaying foreclosure starts in favor of modifying loans or other arrangements, or due to local moratoriums placed on foreclosures.

To further slow foreclosure figures and prevent new foreclosures, the Obama administration announced additional details this week about the proposed mortgage program, designed to help up to nine million families restructure or refinance their mortgages.

The “Making Home Affordable” program takes aim at foreclosures not just to help struggling families, but also to prevent the devaluation of neighborhoods, and stop the steady decline of home values.

Eligibility requirements have been clarified. Those eligible for refinancing under the program are homeowners who are current on their mortgage payments but haven't been able to refinance due to the decrease in the value of their home. Other requirements include:

The loans must be owned or guaranteed by Fannie Mae or Freddie Mac
The property must be owner occupied
The borrower has to have income to support the new mortgage debt
Borrowers need to owe between 80% and 105% of the value of their home
The borrower must have an unpaid principal balance equal to or less than $729,750
The mortgage must have originated before Jan. 1, 2009
Mortgage payments -- including taxes, insurance and homeowners association dues -- have to be higher than 31% of the borrower's gross monthly income

A list of all participating servicers will soon be available online (at FinancialStability.gov).

Mortgages refinanced under the plan will have terms of 30 or 15 years and have a fixed interest rate. The new rate will be fixed for a minimum of five years.



For Further Reading:
More Than 11 Percent of Mortgages Delinquent or in Foreclosure
Mortgage delinquency rate hits record: MBA
Making your home affordable