(Reuters) - Fewer homeowners were behind on mortgage payments in the third quarter as the housing market recovery made progress, data from an industry group showed on Thursday.
The seasonally adjusted delinquency rate on all loans fell to 7.40 percent from 7.58 percent in the second quarter and was down from 7.99 percent a year ago, according to a report from the Mortgage Bankers Association. The delinquency rate includes loans that are at least one payment behind but are not yet in the foreclosure process. The drop was driven by an improvement in the number of homeowners that were 90 days or more behind on payments, which fell to 2.96 percent from 3.19 percent. It was the lowest level since 2008.
"These loans are working their way through the process," said Mike Fratantoni, MBA's vice president of research and economics. "That's being helped by the continued economic growth and job growth we've had, (and) by what looks like a real turn around in the housing market."
The serious delinquency rate, which is the percentage of loans that are 90 days or more past due or in foreclosure, fell to 7.03 percent from 7.31. That was also well off the previous year's 7.89 percent. Still, loans that were 30 days past due rose to 3.25 percent from 3.18 percent, and 3.19 percent a year ago.
The number of loans in foreclosure at the end of the quarter fell to 4.07 percent from 4.27 percent in the biggest quarterly drop on record. It was also down from 4.43 percent a year ago. Even with the drop, the level is still about four times the long-run average, MBA said. The decline in both the foreclosure inventory and the number of loans that were at least 90 days behind indicates a significant drop in the so-called shadow inventory of distressed homes that could end up in foreclosure, said Fratantoni.
"It will increase confidence that we're not going to get another wave of distressed properties hitting the market," which should instead go up for sale at a steady pace, Fratantoni said.
Differences in the way states handle foreclosures continued to show a stark divide between those that use the court system and those that do not. The foreclosure rate in judicial states stood at 6.6 percent, while it was just 2.4 percent in non-judicial states.
The difference between the rates was the widest since MBA started tracking it in 2006. On a seasonally adjusted basis, 0.86 percent of loans saw foreclosure actions started, down from 1.03 percent in the prior quarter and 1.04 percent a year before.
