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Economy in Brief

U.S. Loan Delinquencies & Foreclosures Soar
by Tom Moeller October 22, 2007

Through the second quarter of this year, delinquent payments on loans at commercial banks in the U.S. has soared to the highest level since 2004. The rate on residential loans is up to the highest since the recession year 2001.

The data are reported quarterly by the U.S. Federal Reserve Board and are available in Haver's USECON database. The numbers for 2Q 07 will be reported in the next few weeks.

Loan delinquency rates are also available from the Mortgage Bankers Association. They too show an increase. All mortgages past due by 30 days number 3.02% of all mortgages versus a low of 2.77% at the end of 2004.

These data are available in Haver's MBAMTG database.

The rise in the loan delinquencies has prompted a huge increase in mortgage foreclosure rates.

While these rates are still low, foreclosure rates on all mortgages in the U.S. have risen to 0.65% from their quarterly low of 0.40% in 2004. For prime fixed rate mortgages foreclosures have risen to 0.18% from the low of 0.12% in 2002.

The more dramatic increase has been for adjustable rate mortgages. For conventional adjustable rate mortgages (ARMs) the rise the foreclosure rate is noticeable, but to a still very low level of 0.62% from the low of 0.16% in 2004.

For subprime mortgages, however, the rise in foreclosures has been more dramatic to 2.72% and more than doubled the lowest quarterly rate of 2004. And foreclosure rates on subprime ARMs has about tripled from the quarterly low of 1.32% in 2004. These have clearly followed the past increase in short term interest rates and the latest easing of that rise will (hopefully) lessen the pressure in the mortgage market.

Recent Financial Developments and the U.S. Economic Outlook from the Federal Reserve Bank of San Francisco can be found here.

Delinquency Rate  2Q 07 1Q 07   2006 2005 2004
Real Estate Loans  1.99% 1.77%  1.48% 1.38% 1.44%
  Residential 2.28% 2.07% 1.73% 1.54% 1.55%
  Commercial 1.59% 1.39% 1.11% 1.07% 1.20%
Foreclosure Rate           
All Mortgages 0.65% 0.58% 1.84% 1.64% 1.73%
  Conventional ARM Mortgages  0.62% 0.53% 0.30% 0.19% 0.18%
  Subprime ARM Mortgages 3.84% 3.23% 2.20% 1.52% 1.52%
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