Magazine article Mortgage Banking

Wrath of Katrina Felt in 3Q Delinquency Rate

Magazine article Mortgage Banking

Wrath of Katrina Felt in 3Q Delinquency Rate

Article excerpt

Hurricane Katrina's wrath will continue to be felt into 2006 as evidenced by the rise in the number of Katrina-related residential mortgage delinquencies during the third quarter of 2005, according to the Mortgage Bankers Association (MBA).

MBA's quarterly National Delinquency Survey noted that the seasonally adjusted (SA) delinquency rate for mortgage loans on single-family residential properties stood at 4.44 percent at the end of the third quarter, down 10 basis points from the third quarter of 2004 but up 10 basis points from the second quarter of 2005.

The increase in the number of third-quarter delinquencies reflected the impact of Hurricane Katrina as higher delinquency rates in Louisiana and Mississippi were the result of the destruction and dislocation caused by the storm, according to Doug Duncan, MBA's chief economist and senior vice president.

"Hurricane Katrina was the largest natural disaster this country has faced in the last few generations, and obviously [it] has had a major effect on the local housing markets in Louisiana and Mississippi. In addition, we have the impacts of [Hurricane] Rita in Texas and Louisiana and [Hurricane] Wilma in Florida to consider," said Duncan. "However, the overall U.S. economy grew at almost 4.3 percent in annualized real terms during the third quarter of 2005, adding 147,000 payroll jobs per month."

Delinquencies for all loan types were lower once the hurricane effects were eliminated, noted Duncan. With the effects of Katrina removed, the total delinquency rate decreased 13 basis points rather than increasing 10 basis points.

Total delinquencies increased in Louisiana from 6.67 percent to 24.63 percent between the end of June and the end of September 2005. In Mississippi, total delinquencies increased from 8.53 percent to 17.44 percent. The non-Katrina national percentages were calculated by using second-quarter numbers for Louisiana and Mississippi instead of their third-quarter numbers, explained MBA.

Duncan noted that the impact of the hurricanes will likely result in higher delinquency rates and somewhat higher foreclosure rates for at least the next few quarters.

The percentage of loans in the foreclosure process was 0.97 percent at the end of the third quarter, a drop of 19 basis points from the previous year and a drop of 3 basis points from the second quarter of 2005. …

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