Fast-rising home values are raising alarms among some economists that the home-affordability problem is getting out of hand. But there is one happy side effect: The foreclosure crisis is receding into the background.
The Mortgage Bankers Association, which represents mortgage lenders, on Thursday said that the foreclosure starts rate was merely 0.4% in the second quarter, 0.05 percentage point lower than the first quarter and on par with the rate seen during the housing boom.
The delinquency rate–which includes loans that are past due but not in the foreclosure process–fell 0.24 percentage point to 5.3%, after adjusting for seasonality, its lowest point since the second quarter of 2007.
Marina Walsh, MBA’s vice president of industry analysis, attributed the improvement to a strong job market and the broader housing recovery.
Though fewer homeowners are falling behind, there are still an abnormally high number of borrowers stuck in the foreclosure process. In the second quarter, 2.09% of loans were in some stage of the foreclosure process, 0.13 percentage point lower than last quarter and 0.4 point lower than a year ago. That rate is still twice as high as those seen at the peak of the boom.
As has been the case for years, states that use mainly a judicial foreclosure process, which means typical foreclosures must work their way through the court system, had a higher foreclosure inventory rate than nonjudicial states. Judicial states tend to give more protection and time to delinquent borrowers at the expense of a swift process.
New Jersey maintained the highest percent of loans in foreclosure, at 7.31%, followed by New York at 5.31% and Florida at 4.24%. In the meantime, Colorado, North Dakota and Wyoming had foreclosure inventory rates of below 0.7%.
California, another boom-bust state but one with a nonjudicial foreclosure process, had an inventory of 0.91%.
Overall, 3.41% of loans in judicial states are in the foreclosure process, compared with 1.15% of loans in nonjudicial states.