Good news in the WSJ this morning: mortgage delinquencies are on the decline. According to LPS Applied Analytics, the number of loans that were at least 30 days past due or in foreclosure declined by 8.6% in March. That’s the second month in a row we’ve seen a drop. The president of LPS, which does mortgage processing for most large U.S. banks and has great data as a result, called the new numbers a potential “turning point.” Mark Zandi, the chief economist of Moody’s Analytics, recently made a similar comment.
Let’s just be cautious about assigning too much weight to a couple of months worth of data. Check out the following graph (click on it to make it larger):
That’s from LPS’s report on February data (the March report isn’t online yet). If you look at the black line for total mortgage delinquencies (excluding foreclosures), you can see a seasonal dip that tends to happen around the beginning of the year. One theory on that: tax refund checks help people catch back up on their mortgage payments for a month or two. What happens in the following few months will be telling.
Another point to consider is that the biggest drop is occurring among subprime mortgages. Remember that subprime was the first slice of the market to implode. Waves that came later—such as prime mortgages—aren’t showing the same retreat. Check out the blue line, which shows conforming prime loans, and the orange line, which shows jumbo prime loans. They’re both still on the rise, especially those jumbo loans.
As data has started to show a possible turn-around, folks in the housing counseling and foreclosure mitigation business have stressed that the problem is still overwhelming. NeighborWorks reports that its affiliates in the National Foreclosure Mitigation Counseling Program are still seeing 7,000 new cases a week. RealtyTrac, an outfit that follows foreclosure notices, predicts that some 3 million households will receive some sort of foreclosure notice this year.
A turning point would be welcome news—but either way, there’s still a long slog ahead.