Mortgage Delinquencies Hit Five-Year Low

The share of homeowners behind on mortgage payments or facing foreclosure fell to a five-year low in the third quarter, according to a survey released Thursday.

The Mortgage Bankers Association said 5.7% of mortgages on one-to-four-unit homes were at least 90 days past due or in the foreclosure process at the end of September—representing around 2.6 million households, down from a peak of 4.5 million. The third-quarter figure was down from 7% in the year-earlier period and a high of 9.7% in late 2009.

The report showed that while foreclosures and delinquencies are still elevated when compared to their historical averages, the share of borrowers running into problems has continued to decline steadily over the past two years.

Delinquencies and foreclosures have returned near precrisis levels in states such as California and Arizona that don’t require mortgage companies to take back homes by appearing before a judge.

But in so-called judicial foreclosure states—such as Florida, New York, New Jersey, and Illinois—foreclosures have declined much more slowly. Mortgage firms have struggled at times to demonstrate ownership in those states. Those four states accounted for fewer than 19% of all mortgages outstanding but accounted for almost 46% of all loans in foreclosure at the end of the quarter.

The report showed that the share of loans in which lenders initiated foreclosure, around 0.6% of all loans, fell to its lowest level in six years, down from a peak of 1.4% in early 2009. Before the foreclosure crisis, that share stood at around 0.4% of all loans.

Among the nation’s largest metro areas, Miami had the highest foreclosure rate, with 11.4% of mortgages in some stage of foreclosure, followed by Tampa, Fla., at 9.4%, and New York’s Long Island, at 7.2%.

Home prices have rebounded sharply over the past year as the share of homes being sold through foreclosure has dropped and as investors have fueled intense competition for those properties.

Separate reports from Fannie MaeFNMA -3.32% and Freddie MacFMCC -1.76%, however, showed that their inventories of foreclosed properties increased during the third quarter, the first quarterly gain in three years. The companies held more than 147,000 homes at the end of September, up from 142,000 at the end of June, but down from 158,000 one year earlier.

The June-to-September period marked the first quarter in two years in which the companies acquired more homes than they sold. The companies attributed the uptick in bank-owned inventory to greater foreclosure activity in judicial states, where foreclosures have bottlenecked. Fannie attributed the drop in property sales to “market conditions” in an earnings report made Thursday. Both companies have significantly boosted the prices at which they sell those homes over the past year, reducing their losses.