Rate of mortgage default declines – Economy making headway!

Mortgage Bankers Association's latest data shows that the delinquency rate of the nation has started showing a downward trend, which is good news for the country. The debtors are now going less delinquent. Reports show that the rate of delinquency has actually dropped to a level of 9.85% in the 2nd quarter of 2010, which was at 10.06%. This reading is for those mortgages which are 3 months outstanding.

Results are even better for those mortgages which are outstanding for more than 90 days. The delinquency rates for these types of mortgages went down to 9.11% which was previously at 9.54%. This downfall in seriously delinquent mortgage section was in the first quarter. There can be three plausible reasons for this:

• Number of loans entering the default process is low.
• Homebuyer’s tax credit increased the demand for home sale, which led to sales of many properties before foreclosure as a result of which some of the delinquent loans were removed from statistics.
• Lender-led and government-led modification programs fixed several payment problems.

However, there was one problematic situation that crept up. The rate of delinquency went up to 3.51% from 3.45% (in the first quarter) after a fall for 4 consecutive quarters. This reversal in the delinquency rate is a matter of serious concern for housing market and also the economy. This is a sign of sluggish nature of the whole economy.

This is a serious concern for the existing homeowners, because as the delinquencies increase, the number of homes lost to foreclosures will increase. This will however mean that the banks will decrease the prices for the foreclosed homes. This will be a bonus for the would-be homebuyers. With a steep decline in the prices of the preoccupied properties, the prospective homebuyers will get cheaper deals.

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