One in eleven real estate loans is delinquent* according to the Federal Reserve Board’s latest figures released though Q3 2009. At 9.12%, the current delinquency rate is higher than any point in “recorded history”. The delinquency rate for residential loans is even higher at 9.81%.
1 in 11 Real Estate Loans is Delinquent
Althought difficult to discern from the graph, the rate of delinquencies on real estate loans is slowly slowing. Based on the 1991 behavior, we could peak in as early as mid-2010. However, I suspect reversing the trend is largely going to be dependent on the overall economy, employment situation, and and interest rates. Getting back to 3-percent doesn’t look likely until the end of 2013, at the earliest.
Banks and any reliance on government programs are not able to handle this rate of delinquencies. Not only the loss mitigation departments for loan modifications not able to keep up, but REO departments are going to be hard pressed as well. It likely that the only thing holding back a wave of foreclosures are the banks inability to process them fast enough.
On the plus side, it looks like consumers may be getting a better handle on their finances.
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* Delinquent loans are those past due thirty days or more and still accruing interest as well as those in nonaccrual status
