Record number of homeowners fall behind on their mortgages

A record number of homeowners fell behind on their mortgages during the first three months of the year, but not all the data pointed toward bad news. 

The delinquency of seasonally-adjusted home loans increased to 10.06 percent at the end of the first quarter, but the non-seasonally-adjusted rate showed an improvement. Delinquencies dropped from 10.44 percent in the fourth quarter to 9.38 percent through the first quarter this year, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey.

"Overall, we see a continuation of the pattern of declines in short-term delinquency rates, at least on a non-seasonally adjusted basis, the continued historically high share of delinquencies that are 90 days or more past due, and a leveling off in the pace of foreclosures," said Jay Brinkmann, MBA’s chief economist.

MBA urged caution in using the varying figures to determine whether the housing market is recovering or not. Seasonal adjustments are used to smooth out data but with the extremes in this housing market, the bankers association wasn't sure which numbers were more accurate. 

"Fundamental market factors" may be having a greater influence on the delinquency rates than is normally the case, but mathematical models have difficulty discerning the difference over a short period of time, according to MBA.

"The question is whether the drop represents anything more than a normal seasonal decline or a more fundamental improvement," said Brinkmann. 

“Since discerning what represents a fundamental improvement versus a simply seasonal improvement is probably more of an art than a mathematical science at this point, the seasonally adjusted numbers should be viewed with a degree of caution."

The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure. The percentage of loans in the foreclosure process at the end of the first quarter was 4.63 percent, another record high.

The percentage of loans going in foreclosure was up 1.23 percent in the first quarter, but down 14 basis points from one year ago. 

Delinquency rates been falling as first-time claims for unemployment began declining in March 2009. As those new claims stopped decreasing earlier this year, delinquency rates also ceased dropping.