The Mortgage Bankers Association (MBA) released the results of its national delinquency survey for the second quarter today. Delinquency and foreclosure rates increased in the April-June time period, with both stats setting new records in the 39-year history of the survey.

In a conference call to announce the survey results to the media this morning, MBA's Chief Economist Jay Brinkmann said that nine out of every one hundred homeowners in the United States have crossed the “trouble” threshold, meaning they have already fallen into default or foreclosure on their home mortgages.

On a national scale, the delinquency rate for mortgage loans on one-to-four-unit residential properties stood at 6.41 percent of all loans outstanding at the end of the second quarter of 2008. This figure is up six basis points from the first quarter of 2008, and up 129 basis points from one year ago, based on the MBA's delinquency data.

The delinquency rate includes loans that are at least one payment past due but does not include loans somewhere in the process of foreclosure. According to Brinkmann, who is also SVP of research and economics at MBA, the increase in the overall delinquency rate was driven by increases in the number of loans 90 or more days past due, primarily in California and Florida. In contrast, he said, the 30-day delinquency percentage remains below levels seen as recently as 2002.

Brinkmann said the benign numbers describing these shorter term, entering-delinquency-rates were an indication that we might begin seeing overall delinquency percentages decline, and he described this correlation as one of the few “bright spots” in today's results.

The rates of foreclosure starts and loans in the process of foreclosure, on the other hand, both hit record levels once again this quarter. The percentage of loans on which foreclosure actions were started during the second quarter was 1.08 percent, up 7 basis points from last quarter and up 49 basis points from one year ago. The percentage of loans in the foreclosure process at the end of the second quarter was 2.75 percent, an increase of 28 basis points from the first quarter of 2008 and 135 basis points from one year ago.

“The national foreclosure numbers continue to be driven by the hardest hit states continuing to get much worse,” Brinkmann explained. “The increases in foreclosures in California and Florida overwhelmed improvements in states like Texas, Massachusetts, and Maryland.”

Brinkmann added that for the quarter, a majority of states saw relatively little change one way or the other. California and Florida alone accounted for 39 percent of all of the foreclosures started in the country during the second quarter, and they represent 73 percent of foreclosure increases for the year.

Only eight states had rates of foreclosure starts that were above the national average: Nevada, Florida, California, Arizona, Michigan, Rhode Island, Indiana, and Ohio. The remaining 42 states plus the District of Columbia were below the national average, Brinkmann reported.

“The other factor that continues to drive foreclosure rates is loan type,” continued Brinkmann. Surprisingly, the increase in foreclosure starts of prime adjustable-rate mortgages (ARMs) was greater than the combined increase in fixed-rate and ARM subprime loans. Brinkmann said that we are seeing steep rises in foreclosure numbers for both prime ARMs and option ARMs. He said these types of loans were already causing trouble on the balance sheets of large financial institutions and could be the next big bust in the housing bubble.

The foreclosure starts rates on prime ARMs were 2.47 percent for California and 3.20 percent for Florida, versus the national median of 1.06 percent. The foreclosure starts rate for subprime ARM loans in California was 9.5 percent and in Florida 9.1 percent, about double the national median rate for subprime ARMs.

“Perhaps the question most asked these days is whether we are close to a bottom, in other words, when will delinquency and foreclosure rates begin to head down,” Brinkmann said. “The simple answer is that the idea of a national bottom is somewhat meaningless. Real estate markets are local and some markets are already improving,” he explained.

Brinkmann cited examples like Michigan, one of the worst hit markets in the country, which has now gone three quarters with little to no increase in its foreclosure rate, and Massachusetts which showed a very large drop in foreclosure starts, perhaps signaling a bottom.

“Because of the sheer size of California and Florida, an improvement in the national numbers, whether delinquencies, home prices, or any other measure, is unlikely until we see some turnaround in those two states," Brinkmann continued.

Brinkmann added that before we begin to see the light at the end of the tunnel, we'll have to establish a better balance between the number of people who want to buy homes versus the number of new homes being built and the overall surplus of homes on the market.

To view the results of the MBA survey, including statistical break-downs by loan type, click here.