The rate of performing borrowers who rolled into delinquency status decreased in the second quarter, Fitch Ratings reported Monday.
New delinquency roll rates showed stronger performance across all categories (subprime, Alta-A, and prime), with non-agency roll rates hitting their lowest level since early 2007.
Overall, Fitch’s delinquency roll rate index fell to 2 percent in the second quarter of this year, down from 2.4 percent in the previous quarter and down from 2.2 percent a year ago.
Fitch credited the improvement to borrowers receiving tax refunds, among other factors.
“The improved roll rates are driven most notably by home price increases, steady job growth and positive selection among borrowers remaining in the mortgage pools,” said Sean Nelson, director at Fitch.
“One area of concern remains prime mortgage loans originated before 2005, which continue to struggle due to concentrations of adversely selected borrowers,” he added.
Fitch expects the improvements to continue, noting new delinquency roll rates have improved year-over-year since 2010.
Additionally, Fitch reported outstanding loans more than 60 days or more past due improved across all sectors in the residential mortgage backed securities (RMBS) space. Although Fitch noted concerns for pre-2005 vintages, the prime delinquency rate for 2010 loans are at or near zero, while 2005 to 2007 vintages are improving.
Fitch also found foreclosure liquidation timelines have lengthened as short sales are used less frequently to handle non-performing loans.
According to the report, short sales liquidation timelines tend to be about 12 months shorter than REO timelines. While short sales were still the most commonly used tool for non-performing loans, accounting for over half of all resolution, Fitch noted the as a percentage of all resolutions, short sales actually decreased in the second quarter.
The extension in liquidation timelines is also a reflection of “increased procedural challenges servicers face due to regulatory changes,” as well as “some adverse selection of properties not resolved through short sales,” the report found.
By Esther Cho