Academic journal article Journal of Business and Behavior Sciences

The Profile of U.S. Mortgage Delinquencies: 1979-2011

Academic journal article Journal of Business and Behavior Sciences

The Profile of U.S. Mortgage Delinquencies: 1979-2011

Article excerpt

ABSTRACT: We examine the profile of U.S. household mortgage delinquencies and foreclosures initiated for the period 1979 to 2011 employing rich data from the Mortgage Bankers Association. By profile we refer to the number of mortgages past-due over specific time categories. We report that while overall delinquencies and foreclosures have increased, the profile has also changed over the most recent decade. Previous to 2000 changes in number of mortgages past due only 30 to 60 days had no long-run impact on the number of foreclosures initiated, whereas in the decade since 2000, such changes foretell of long-run issues with foreclosures.


U.S. mortgage delinquencies reached Post WW-II highs in 2010, before beginning a slight decline to the present. Based on quarterly data from the Mortgage Bankers Association (MBA), in healthy economic times we find roughly 4% to 5% of mortgages past due. Following the economic recessions of 1980-1982, 1990-1991, and 2001-2002 we find that the percent past due nudged above 5%.The U.S. financial crisis that began in the year 2007 accompanied a drop in home values, as illustrated by the Case-Shiller index, of approximately 32% between January 2007 and November 2011. Along with the decrease in housing prices and an increase in unemployment, came an increment in past due Mortgages.

The ability to anticipate changes in the delinquency profile may be of value to decision-makers in public administration, the financial services sector, and the construction sector of the economy. Increases in the number of mortgage delinquencies and possible subsequent foreclosures exert downward pressure on home values (Dudley 2012, Hartley 2010,Mian, Sifi and Trebi 2011). In turn, household and business balance sheets deteriorate, adversely impacting their borrowing capacity (Bemanke 2012, Schweitzer and Shane 2010).Any resulting inventory overhang of foreclosed homes acts as a drag on new home construction and can drain capital from financial institutions (Dudley 2010). Unoccupied homes erode the tax base of municipalities (Fitzpatrick IV and Zenker 2011) and the pile-up of foreclosure proceedings may strain the judicial system.

Miranda and McGrath (2011) examined different forecasting methodologies of aggregate U.S. mortgage delinquency rates for the period 1987 through 2011. They reported that a parsimonious model that used indicators of household wealth, credit conditions, and employment to forecast delinquency rates was robust, at least until the most recent few years. Two avenues left unexplored in Miranda and McGrath were (l),to consider foreclosures, rather than only delinquencies and (2), to examine the profile of delinquencies, rather than aggregating delinquencies of all vintages together. The rich data available, and described below, allow for the examination of delinquencies that are categorized into those 30 to 60 days past due, 60 to 90 days past due, and the like, through those for which foreclosures have been initiated. It may be the case that a swell or trough in the number of delinquent mortgages past due only 60 days foretells of a future similar change in the number of severely delinquent mortgages or foreclosures initiated.

The outline of this paper is as follows. In the Data and Methodology section we (1),describe the delinquency data (2), provide an overview of the time series behavior of the data, and (3), explains the methodology to be employed to further examine the concept of the dependency of foreclosures on delinquencies. Following in the section titled Dependency of Foreclosures, we apply the appropriate models to the data to examine the extent to which the frequency of foreclosures depends upon the preceding frequency of mortgage delinquencies.


To examine the profile of mortgage delinquencies we use seasonally adjusted quarterly data on mortgage delinquencies collected by the Mortgage Bankers Association (MBA) for the time period 1979 to 2011. …

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