Although foreclosure data is no longer that meaningful due to banks significantly slowing their processes, looking at delinquencies can still be useful. Noting how many people are late on their payments helps us to understand housing market trends. In the first quarter, delinquencies were essentially flat -- across all stages -- according to the Mortgage Bankers Association. Is this news good, bad, or lukewarm?
First, here's a chart that shows the data (which is seasonally adjusted):
You can see that delinquencies appear to have peaked in early 2010 and fell from there. So in a sense, the first quarter's news doesn't look particularly good: in the prior three quarters, delinquencies had fallen. Why didn't last quarter fare as well?
One explanation could be that the foreclosure slowdown has also slowed the improvement in late-term delinquencies. How could that be?
Let's think about the three stages shown above. You'll notice that the early two delinquency buckets ("30 to 59" days and "61 to 89") have moved a little bit over the past few years, but it's the 90+ day bin that has seen the most change. It rose significantly, and then began to fall last year.
Did this indicate that fewer borrowers were having trouble paying their bills? To some extent, but it also reflects banks' foreclosure processing. When a loan is transferred to a stage of foreclosure, it is no longer considered delinquent. Most of those 90+ loans that disappeared moved from being delinquent to being in foreclosure.