What It Means to Have Foreclosures at Six-Year Lows

NEW YORK ( TheStreet) — The mortgage delinquency rate has decreased for the sixth consecutive quarter and is at 6.04% of all residential mortgage loans through the second quarter of 2014, according to the Mortgage Bankers Association .

In addition, the percentage of loans in foreclosure during Q2 stood at 2.49%, down from both the first quarter of 2014 and for all of last year. It's also the lowest percentage rate since the first quarter of 2008 and stands as a significant sign the residential real estate market is healthy and vibrant again. That could lead to more aggressive lending from banks and mortgage companies.

Analysts at the MBA say a healthier employment picture and continued growth in home values have helped reduce the amounts of late mortgage payments.

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"Delinquency and foreclosure rates fell to their lowest levels in more than six years, and the rate of new foreclosure starts is at its lowest level since 2006," says Mike Fratantoni, MBA's chief economist. "Strong job growth and continued increases in home prices in most markets have been the main contributors to these steady improvements in mortgage performance."

What we're seeing now is what Fratantoni describes as a normal range for delinquencies and foreclosures.

"We have returned to more typical seasonal patterns with respect to mortgage delinquency, with 30-day and 60-day delinquency rates increasing from the first to the second quarter on an unadjusted basis," he says. "Adjusting for the seasonal pattern, we estimate that delinquencies were down for the quarter, and are down almost a full percentage point from last year."

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The MBA also notes that in big U.S. states where the housing market really took a toll on the economy, foreclosures and delinquencies are back to pre-Great Recession levels. States where that is the new normal include California and Arizona. But these states also have judicial systems where foreclosures move relatively quickly, as opposed to states such as New Jersey and Florida that have slower-moving foreclosure court systems and thus have foreclosure rates up to three times the national average, the MBA says.

Past that, all this is good news for homeowners, who can expect their home values to increase given the deterioration of foreclosed homes in their communities. It's also good news for new homebuyers, who can expect banks to be more amenable to lending money and closing mortgage deals.

That's the big picture, of course, and other factors such as new mortgage applications and interest rates will also affect the mortgage market. But at least delinquencies and foreclosures will have less of an impact on that market than at any point during the past six years.