June Sees a Drop in Mortgage Delinquencies

If May of this year was an indicator of the number of mortgage delinquencies to expect for the year, then the housing market would have been in bigger trouble than it is now. But June showed a bright side despite the fact that mortgage delinquencies are still hovering around record highs.

Last month, the number of mortgage payments that were 30 or more days past due was only at 9.39 percent. That might seem like a high number, but that’s down from 9.54 percent in May. In addition to those numbers, about 3.69 percent of the outstanding mortgages were going through various stages of foreclosure proceedings. That’s about a 0.03 percent drop from the previous month and about a 0.12 percent drop from the record highs of March of this year.

The drop in serious delinquencies has fallen for two consecutive months and they are now hovering around the rate that we haven’t seen since September 2009. Currently, there are about twice as many home loans that are delinquent compared to the number of homes in foreclosure. That means these homes are going to be on the banks’ records for quite some time which will only continue to drag the housing market deeper into the slump that it is already in.

Foreclosures on home loans that were guaranteed by Freddie Mac and Fannie Mae have also increased in recent months. The federal government’s attempt to help troubled homeowners with loan modification options has failed in terms of providing permanent modifications for people who have trouble making their mortgage payments. However, Freddie Mac announced that the number of seriously delinquent mortgages on its books has fallen for the fourth consecutive month. That number still stands near 4 percent however.

The largest increases in delinquencies for the year ending in June occurred in Seattle, Phoenix and Charlotte. Sacramento and San Diego also experienced a rising number of delinquencies on home loans. The largest declines were seen in Washington, St. Louis and Denver.

These numbers, however, can be misleading. Is the number of delinquencies falling because those homes are going into foreclosure? And is the number of foreclosures dropping because the foreclosed properties have been discharged so they are off the books and back on the market? Or am I just being cynical? What are your thoughts?