Mortgage and Consumer Loan Delinquencies Continue To Spike Up.

The Mortgage Brokers Association released the results of their National Delinquency Survey for the first quarter of 2008 today. The seasonally adjusted delinquency rate for mortgages on one - four unit residential properties was at 6.35%, up from 5.82% in the previous quarter and up from 4.84% a year ago. Foreclosures started were at 0.99% up from 0.83% in the previous quarter and 0.58% a year ago. Both of these percentages are the highest on record since the survey began in 1979.

Subprime delinquencies rose to 18.79% from 17.31% in the previous quarter and 13.77% a year ago. However, delinquencies are not confined to subprime, prime mortgage delinquencies rose to 3.71% up from 3.24% in the fourth quarter of 2007 and 2.58% in the first quarter of 2007. Prime delinquencies averaged 2.37% from 2003 - 2006.

Last month, the Federal Financial Institutions Examination Council (FFIEC) released their statistics on mortgage and consumer loan delinquencies. Their definition of a 30 day late is a loan that is over 30 days late when the bank reports (page 501 on this manual). For example if a loan had a March 1st due date and payment was not received by March 31st, then the MBA survey would count that as 30 days late. The FFIEC report would count not count that as "over" 30 days late. If they payment was not received by April 30, then the FFIEC methodology would count that as over 30 days late but not "over" 60 days late. Therefore, the FFIEC numbers for a 30 day late are in between the MBA's 30 day and 90 day delinquency numbers. Nevertheless, the FFIEC delinquencies are showing similar spikes up to the MBA 30 and 90 day delinquencies.

Consumer loan delinquencies are also spiking up. Consumer delinquencies spiked up during the last two recessions and did not start to fall until after the recession ended. It is alarming that we are having this acceleration in delinquencies without the severe effects of a recession like rising unemployment and big drops in personal income.

The stock market is pricing in that the worst is behind us. However, the delinquencies are continuing to accelerate. Home price depreciation is also accelerating. The charts are the inverse image of a falling knife. I believe it is too early to call the bottom yet especially if we do enter a full blown recession.

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