The Mortgage Bankers Association, in its quarterly snapshot of the mortgage market released Wednesday, reported that the percentage of mortgage payments that were 30 or more days past due for all loans tracked jumped to 4.67 percent in the July-to-September quarter.
That marked a sharp rise from the second quarter's delinquency rate of 4.39 percent and was the worst showing since the final quarter of last year, when delinquent payments climbed to a 2 1/2-year high in the aftermath of the devastating Gulf Coast hurricanes.
These numbers are coming off of some very low readings. So while the jump is important to note, it's also important to remember where we are in the cycle. That being said...
Delinquency rates in the third quarter were considerably higher for "subprime" borrowers -- people with weaker credit records who are considered higher risks -- especially those who have adjustable-rate mortgages.
Subprime borrowers had a delinquency rate of 12.56 percent in the third quarter, the highest in more than three years. The delinquency rate for these borrowers holding adjustable-rate mortgages was even higher -- at 13.22 percent in the third quarter, also the worst reading in more than three years.
Those are some high numbers. What's really important to remember is next year between $700 billion and $1 trillion (depending on which news source you base the estimate on) of ARMS will reset -- most a higher rate. That means going into next year the subprime market could experience some really ugly developments.