The Mortgage Bankers Association announced this week that the number of delinquent homeowners rose a little in the first quarter of 2011, but over the course of a year, the number has dropped substantially.

According to the MBA delinquency survey, the delinquency rate for mortgage loans on one-to-four-unit residential properties increased to a seasonally adjusted rate of 8.32 percent of all loans outstanding as of the end of the first quarter of 2011, an increase of seven basis points (.07 percent) from the fourth quarter of 2010.

But the better news is that the number of homeowners who are delinquent on their mortgage decreased 174 basis points (1.74 percent) from one year ago. The non-seasonally adjusted delinquency rate decreased 117 basis points to 7.79 percent this quarter from 8.96 percent last quarter.

According to the report, the combined percentage of loans in foreclosure or at least one payment past due was 12.31 percent on a non-seasonally adjusted basis, a 129 basis point decline from 13.60 percent last quarter.

While this doesn’t sound like a huge decrease, MBA chief economist Jay Brinkmann says it’s a sign that the “mortgage market is on the mend.”

Those borrowers who are less than 90 days late on their mortgage (known in street parlance as a “short-term” delinquency) remain at pre-recession levels, Brinkmann said, adding:

• The number of borrowers that are 90 days or more delinquent on their mortgage payments has dropped for five straight quarters and is at the lowest level since the beginning of 2009.
• Foreclosure starts are at the lowest level since the end of 2008 and had the second largest drop ever.
• The percentage of loans somewhere in foreclosure is down from last quarter’s record high and also had one of the largest drops we have ever seen, although the reasons for the drop will differ from market to market.”

Brinkmann noted that loans originated between 2005 and 2007, at the height of the real estate market showed particular improvement.

“These are the loans that drove the mortgage market collapse and now represent about 31 percent of loans outstanding but 65 percent of the loans seriously delinquent. Given that loans originated during this period are now past the point where loans normally default, and that loans originated since then generally have better credit quality, mortgage performance should continue to improve,” he said.

While it’s interesting to look at the national statistics, real estate is driven entirely by local business and market conditions. Local economies drive home value, since it’s tough to pay the mortgage if you don’t have a regular paycheck coming in. But beyond having dollars in your pocket, whether you or someone you know has been hurt by the Great Recession “determine values and peoples’ perception of values of conditions,” Brinkmann added.

According to the survey, some states are still in trouble:

• Twenty-four percent of all mortgages in the country that are in foreclosure are in Florida and 23 percent of the loans in Florida are anywhere from one payment past due to in foreclosure.
• In Nevada, foreclosure actions are still being initiated at an annualized rate of over 9 percent.
• In Arizona the annualized rate of foreclosures started is over seven percent and more than half of all of the loans in foreclosure in this country are in just five states.

Yet Brinkmann noted that 38 states have foreclosure rates that are below the national average. “We have areas of recovery but those numbers are often overwhelmed by the bad numbers still coming out of a few large states,” he said.

“Finally, we need to recognize the increasing divergence in market recovery attributed to differences in states’ laws. The states with the biggest increases in the number of loans in foreclosure are Florida, New Jersey and Illinois. The states with the largest decreases in loans in foreclosure were California, Arizona and Michigan. Each of these six states had declines in loans 90 days or more past due and in the rate of new foreclosures started,” Brinkmann noted.

What differentiated those with increases in the percentage of loans in foreclosure? Florida, New Jersey and Illinois have judicial foreclosure processes that tend to lengthen the foreclosure time line and increase the number of loans that sit in foreclosure.

“The impact, however, of individual state judicial foreclosure laws in keeping the number of loans in foreclosure elevated in some states, and thus keeping high the potential overhang of housing inventory in those states, is not a national issue, even though it increases the national foreclosure numbers,” he added.