Mortgages Blog

The delinquency rate for residential mortgage loans increased in the second quarter.

About 8.44 percent of the more than 43 million outstanding mortgages in the United States are past due, according to the Mortgage Bankers Association's National Delinquency Survey.

That's an increase of 12 basis points compared to the last quarter and it does not include mortgages in foreclosure. Even though this is not a huge jump, it's alarming news for the housing market. In the first three months of the year, the percentage of delinquent had decreased.

"Mortgage delinquencies are no longer improving and are now showing some signs of worsening," said Jay Brinkmann, MBA's Chief Economist.

What's to blame? The lack of jobs.

The increase in total delinquencies is attributed mostly to a jump in the number of homeowners who are one-payment, or 30-days past due. The number of loans that are 90 days or more past due actually decreased slightly in the second quarter.

The increase in short-term delinquencies is "very much tight to what took place in the employment market," Brinkmann says. During the second quarter of this year, the unemployment rate rose from 8.8 to 9.2 percent. It's now at 9.1 percent.

The percentage of loans that went into foreclosure in the second quarter also declined slightly to 0.96 percent.

That may be somewhat good news. But the combined percentage of loans that are past due and loans in foreclosure is still alarming.  Together, 12.54 percent of outstanding mortgages are in some stage of distress. While that's much lower than last year, it's still a 23 basis point increase from last quarter.

Could this be another sign that the country is on the verge of a second recession?

Brinkmann doesn't think so.

"We don't see a recession," he says.

But he does recognize that the housing market is far from recovery. Think of the housing market as an accident victim who needs the bleeding to be stopped before recovery, he says.

"For housing, the bleeding is the delinquency rate," he says.

I guess until that patient stops bleeding, don't expect much improvement in the housing market.

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