Iowa delinquencies, foreclosures trail national average

Iowa homeowners are fairing better than most of the country, according to a fourth quarter survey conducted by the Mortgage Bankers Association (MBA). Survey data showed that Iowa ranked 30th of 50 states in foreclosure starts in the fourth quarter of 2007 (.64 percent as compared to the national average of .88 percent).

“Compared to the rest of the country, Iowa is fairing better than most,” said Dan Vessely, president of the Iowa Bankers Mortgage Corporation, citing four critical categories from the MBA survey. “This is evidenced by the fact that Iowa ranks 38th when measuring 90-day delinquents, a reliable barometer for estimating future foreclosures,” he added.

In the MBA study, Iowa also moved from 26th in the third quarter of 2007 to 30th in foreclosures started.

“Iowa’s better overall performance reflects a more stable economy and less volatility in home values,” said John Sorensen, president and CEO of the Iowa Bankers Association. “In addition, most Iowa communities are served by local lenders who steered clear of sub-prime adjustable rate hybrid loans.”

Iowa is at the national average in foreclosure inventory. However, that statistic overlooks Iowa’s debtor-friendly foreclosure laws that allow delinquent loans to remain in foreclosure status longer than would be the case in other states. Because of the uniquely long legal process, Iowa foreclosure numbers tend to be adversely affected by counting the same foreclosures multiple times quarter over quarter. For more information on the survey, visit www.mortgagebankers.org.

This chart shows the number of foreclosure starts during each quarter in 2006 and 2007. The national average peaked at the end of 2007 at .88 percent, while Iowa finished the fourth quarter of 2007 at .64 percent. Chart data is based on the MBA’s National Delinquency Survey.

Gronstal testifies at U.S. Senate committee hearing

Tom Gronstal

In testimony at a March 4 hearing in Washington, D.C., Iowa Superintendent of Banking Tom Gronstal told the U.S. Senate Committee on Banking, Housing and Urban Affairs that problems currently facing the banking industry primarily stem from the weakening of the housing market and the ensuing credit crunch.

Gronstal said the collapse of the housing finance market has resulted in a collapse of investor confidence in bond ratings, bond insurers and collateral valuation of asset-backed securities. The impact has spread to trust-preferred securities issued by banks, auction rate certificates issued by student loan secondary markets and a general depreciation of asset-backed securities held in banks’ portfolios.

Gronstal represented the Conference of State Bank Supervisors on the panel, which also included representatives of the Federal Reserve Board, Federal Deposit Insurance Corporation, Office of Thrift Supervision, Office of the Comptroller of the Currency and the National Credit Union Administration.

Gronstal said state regulators are prepared to handle a greater number of bank failures than in recent years, although he indicated that widespread failures are not expected based on current information and conditions.

He outlined initiatives now under way by regulators to improve supervision in the mortgage industry and efforts to rein in unscrupulous mortgage lenders. The key component of the states’ initiative is the Nationwide Mortgage Licensing System, launched in January. He also reviewed the efforts of the State Foreclosure Prevention Working Group which works with participants in the subprime mortgage industry.

“State regulators must remain active participants in mortgage supervision because of our knowledge of local economies and our ability to react quickly and decisively to protect consumers,” Gronstal said.

Click here to read Gronstal’s complete testimony.