Mortgage delinquency rates rising again

Unemployment from the weak economy and strategic default from the double dip in home prices have contributed to rising mortgage delinquency rates reversing a two-year downward trend.

Irvine Home Address … 3922 CLAREMONT St Irvine, CA 92614

Resale Home Price …… $425,000


There was a dream

When you said we would be free

But now is the time

To be real

Bagman honey

Bagman sugar

Stone Temple Pilots — Bagman

Nobody wants to end up the bagman holding property. The last buyers in a housing bubble are by definition, bagholders. Many of those people are opting out through strategic default. As they do, delinquency rates are starting to rise again.

A low delinquency rate is a precursor to a healthy housing market which appreciates at the rate of wage inflation. Since peaking in January of 2010, mortgage delinquency rates have generally been falling. Over the last few months, what looks like a statistical blip is turning into an alarming rise in delinquency rates.

Delinquent loans on the rise again, a grim sign for housing

August 22, 2011

It's an ominous sign for housing. The percentage of homeowners who have missed at least one mortgage payment has risen for the second straight quarter, the Mortgage Bankers Assn. says.

Officials at the trade group expressed concern Monday that the sluggish economy may be creating another group of distressed borrowers.

It is clear that the downward trend we saw through most of 2010 has stopped,” the Mortgage Bankers Assn.'s chief economist, Jay Brinkmann, said in a news release.

The second-quarter delinquency rate for loans on one- to four-unit residential properties increased to 8.44% of all U.S. mortgages as of June 30, up from 8.32% on March 31 and 8.25% on Dec 31.

But not all the news was bad, the trade group said Monday in its quarterly release on soured loans. Long-term delinquencies — those with three or more missed payments — were still declining.

The long-term delinquency rate is totally dependent upon foreclosures to clear them out. Expect this number to creep up as well since lenders are slowing foreclosures.

And the percentage of homes on which foreclosure proceedings began during the quarter was 0.96%, which is down slightly from the levels seen during the first quarter of this year and the final quarter of 2010.

Still, “mortgage delinquencies are no longer improving, and are now showing some signs of worsening.”

From 1995 to 2005, delinquency rates hovered between 4% and 5.5%. The implosion of the Ponzi scheme caused delinquency rates to double from mid 2007 to early 2010. A combination of better underwriting standards and foreclosures has reduced the delinquency rate to its still-elevated levels. Mortgage delinquency rates need to fall below 5.5% and stay there.

Most of the borrowers who are delinquent on their mortgages will ultimately face foreclosure. Loan modifications have failed to help borrowers sustain ownership, but it has succeeded in allowing lenders to kick the can down the road and foreclose later. With redefault rates between 50% and 75%, the delinquency rate will not go down by borrowers curing their loans, it will only go down by lenders stepping up their foreclosures. Unfortunately, lenders have been slowing their rate of foreclosure which will serve to drag out this process.

Imagine the owners in default as water in the pool. The only effective method of draining the pool is through the foreclosure pipeline. As lenders reduce the flow of foreclosures, they fail to bring down the rate of delinquency. Further, when a house price double-dip and economic weakness causes more delinquencies, lenders fall even further behind.

It isn't until both delinquency rates and foreclosure rates fall back to their historic norms and the resulting REO is liquidated that the housing market will truly be stable. Right now, we are heading the wrong direction.

You Ugly” isn't quite so ugly anymore

Today's featured property was first featured in the September 2007 post, You Ugly. Apparently the buyer from 2008 was a kool aid buyer who also defaulted on his mortgage. I profiled that fiasco in March of 2010 in Market slices first wave of knife catchers.

The property was purchased on 2/28/2008 for $458,500. The owner used a $412,650 first mortgage and a $45,850 down payment. It appears he paid for less than one year before giving up:

Foreclosure Record

Recording Date: 02/11/2010

Document Type: Notice of Sale

Foreclosure Record

Recording Date: 04/01/2009

Document Type: Notice of Default

The lender, HIGH TECH LENDING INC, danced for ten months before deciding to push this owner out.

The latest owner fixed the property up. There isn't much that can be done with the negatives of the location, but at least the inside is much nicer than it was in 2007.

At $425,000, this is one of the lowest priced detached 3/2s in Irvine. The cost of ownership is less than $2,200 for an owner-occupant using FHA financing. Like 3742 CLAREMONT Irvine, CA 92614 profiled earlier this week, the house backs onto the Culverdale Wilderness Park — the polluted greenbelt adjoining interstate 405. Apparently lenders are clearing out their REO on this street as they continue to hold their desirable properties and liquidate their garbage.


This property is available for sale via the MLS.

Please contact Shevy Akason, #01836707


Irvine House Address … 3922 CLAREMONT St Irvine, CA 92614

Resale House Price …… $425,000

Beds: 3

Baths: 2

Sq. Ft.: 1075


Property Type: Residential, Single Family

Style: One Level, Traditional

Year Built: 1971

Community: Westpark

County: Orange

MLS#: P788300

Source: SoCalMLS

Status: Active

On Redfin: 42 days


Property has fresh paint, new carpet, new appliances and its ready for move in! Highlights include newer dual paned windows throughout, generous open floorplan with vaulted ceilings at family room, separate kitchen eating area, three spacious bedrooms, large open backyard with shed, brick paver driveway and its a rare single story!


Proprietary IHB commentary and analysis

Resale Home Price …… $425,000

House Purchase Price … $458,500

House Purchase Date …. 2/8/2008

Net Gain (Loss) ………. ($59,000)

Percent Change ………. -12.9%

Annual Appreciation … -2.1%

Cost of Home Ownership


$425,000 ………. Asking Price

$14,875 ………. 3.5% Down FHA Financing

4.19% …………… Mortgage Interest Rate

$410,125 ………. 30-Year Mortgage

$115,421 ………. Income Requirement

$2,003 ………. Monthly Mortgage Payment

$368 ………. Property Tax (@1.04%)

$0 ………. Special Taxes and Levies (Mello Roos)

$89 ………. Homeowners Insurance (@ 0.25%)

$472 ………. Private Mortgage Insurance

$50 ………. Homeowners Association Fees


$2,982 ………. Monthly Cash Outlays

-$315 ………. Tax Savings (% of Interest and Property Tax)

-$571 ………. Equity Hidden in Payment (Amortization)

$22 ………. Lost Income to Down Payment (net of taxes)

$73 ………. Maintenance and Replacement Reserves


$2,191 ………. Monthly Cost of Ownership

Cash Acquisition Demands


$4,250 ………. Furnishing and Move In @1%

$4,250 ………. Closing Costs @1%

$4,101 ………… Interest Points @1% of Loan

$14,875 ………. Down Payment


$27,476 ………. Total Cash Costs

$33,500 ………… Emergency Cash Reserves


$60,976 ………. Total Savings Needed


I want to thank everyone who attended last night's first-time homebuyer presentation. It was a pleasure meeting all of you. Anyone who wants to share their feedback can email me at, or post your astute observations below.

We will be doing another presentation at the end of September and we plan on doing these monthly at the Intercap Lending location (9401 Jeronimo, Suite 200, Irvine, CA 92618).

18 thoughts on “Mortgage delinquency rates rising again

  1. winstongator

    Did you notice your link on the Redfin page?

    I think the uptick in short-term delinquencies is due to the overall declining economic prospects. Things were looking up, relatively speaking, in the early spring, and have since cooled dramatically. Someone could have been much more confident about their financial position in March than today. If they were thinking about defaulting & saving 6-12 months of payments, they would have been less likely to do it when things were looking up than now. A year ago home prices looked to be going back up (at least to non-readers-of-IHB). If you think your job situation is settling and you’re gaining equity, you keep paying. If your job situation gets shaky and you lose what little equity you had, you consider defaulting a lot more.

    1. IrvineRenter

      That is exactly the phenomenon banks are afraid of. By engineering a false rally in 2009, they managed to maintain borrower denial for another two years. If borrowers capitulate in large numbers, the market will finally clear, but the bank losses will mount as a result.

  2. awgee

    I haven’t tried it yet, but I wonder what the delinquency rate chart overlaid with the Credit Suisse ARM recast chart would look like. Is it possible that the two will be similar except the default chart will be about 1 and 1/2 years behind the recast chart?

    1. Schadendude

      That’s funny Awgee, right before I read your comment, I said that very thing to my wife.

      ARM resets are peaking again. Wonder if people are getting these nastygrams (realitygrams) in the mail and just throwing up their hands.

  3. wheresthebeef

    Culverdale Wilderness Park…aka a small strip of grass and trees between you and one of the busiest freeways in the country.

    I can only imagine the meeting when they were searching for names for this, there must have been loud laughter when someone mentioned the wilderness park!

    1. IrvineRenter

      Yes, the idea of a wilderness park conjures up images of large expanses of untouched nature. This park is not large, untouched, or wild. It must have been a joke to the planners, but the sales and marketing departments probably tied to feature this back in the day.

    2. architectdave

      A “wilderness” park with a gigantic power structure in it directly behind the home. Yeah!

    3. Vincenzo

      Why can’t they plant a few rows of tall trees to block noise?

      Some of the houses have pyramidal cypresses near behind the walls.

      Though, smog covers wide areas around highways, in other words, all Irvine.

  4. gepetoh

    Seriously, that house is a 1000 sf? Looks much bigger in that picture… I guess the lot allows for expansion, but that price seems excessive still.

    IR, one suggestion on the link to Redfin: Can you have it open another window or tab? Hate that it takes me out of IHB into Redfin…

  5. Marc

    U.S. May Back Refinance Plan for Mortgages;
    Will we see more political support of attempts to stabilize/increase home prices? I think so, since you can’t win elections against 65% of the voters… I am not saying that more support would be fair, but most people think about themselves first when it comes to selecting their candidate. Since a lot of voter’s wealth is tied up in real estate you will see candidates propose ideas to turn around housing.

    1. HydroCabron

      The support for this on liberal blogs is pretty firm , because it’s vote-buying Obama can easily sell as “helping ordinary families.”


      No idea how this would really help anything but (a) Obama’s reĆ«lection and (b) our continued descent into the same hole Japan dug.

      No matter who is in power, I suspect this will happen. It will not stop the descent of prices, but it will harm, not help, the “families” – I hate that frickin’ word! – getting the mods, since they will be locked more tightly into debt slavery.

      The people proposing this stuff actually seem to think we’re near a bottom, and that this sort of activity will stabilize prices.

      Meanwhile, renting “families” will be denied their rightful place as owners of the homes currently occupied by these losers.

  6. double foreclosure

    So this property was foreclosed on twice?

    Bought in 04 foreclosed in 07 then sold to someone in 08, then foreclosed on again in 2010 and now for sale as a second time as a REO?

    Many more of these double rainbows, i mean foreclosures out there?

    1. winstongator

      I have seen a couple of these in my part of NC. Definitely fixer-uppers, probably both times they got fc’d. Even for the savings on the ones I saw, I wouldn’t want to go after them.

  7. whatever

    Several years ago I was looked at a house about the same distance from the 405 on the opposite side (off Michelson so sort of diagonally across the freeway from this one.

    Outside that house I literally had to yell at the person with me in order to have a converation. I didn’t even bother going inside – the noise around a house like this is no different from just standing in the middle of the freeway.

  8. IrvineKidz

    I have actually toured the place… the only good that I can take out from the tour is that you would get EXCELLENT reception in this house. Several cell phone radios are affixed to the massive powerline.

  9. IndyLew

    The Emergency Cash reserves or fix up and decorating cash shown in the computation to buy the home using a mortgage loan, are those cash items lender-required to be owned and proven these days to get a loan?

    Any idea the general loan default rate levels in Irvine (30-60-90-)? Percent homes with no debt? Conversion trends?

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