Fewer borrowers were delinquent in the second quarter of 2010, providing some hope that the worst of the housing weakness is behind us.
CNN reported that the overall delinquency rate for second quarter dropped to 9.85%, down from 10.06% in Q1. These results show that fewer loans are entering the default process. It also indicates that the housing market has absorbed many of the foreclosed homes that were available. Finally, it is sign that mortgage modifications programs have had some positive impact, even if participation has been lower than originally predicted. Those who were in serious delinquency status (90+ days late or already reposed by the lender) dropped from 9.54% in Q1 to 9.11% in Q2. CoreLogic also reported that the percentage of borrowers who were underwater on their mortgages (owe more on their loan than their property is worth) dropped from 23% from 24% in Q1. This small drop is mostly notable in the direction, hopefully indicating that fewer borrowers will have reason to enter into delinquency in the future.
Tempering this bit of good news was the fact that first time delinquencies inched up in the quarter. This was the first increase in the past four quarters and would seem counter intuitive to the declining overall rate. The CNN article explained that the slight increase was most likely linked to the continued pressures on the overall economy and recent unemployment figures provide some additional explanation. Bear in mind that those facing first time delinquency are a long way off from foreclosure, which is a much more dire circumstance to overcome.