MBA: 2Q Mortgage Delinquencies Fall to One-Year Low

The Mortgage Bankers Association on Thursday released its Second Quarter National Delinquency Survey, showing the delinquency rate for mortgage loans on one-to-four-unit residential properties fell to a seasonally adjusted rate of 5.47 percent of all loans outstanding—the lowest rate since first-quarter 2020.

MBA said the delinquency rate fell by 91 basis points from the first quarter and by 275 basis points from a year ago. MBA Vice President of Industry Analysis Marina Walsh, CMB, said the drop in the delinquency rate for FHA loans and VA loans represented the largest quarterly decline for both in the history of MBA’s survey dating back to 1979.

“Much of the second-quarter improvement can be traced to later-stage delinquent loans – those 90 days or past due, but not in foreclosure,” Walsh said. “The 90-day delinquency rate dropped by 72 basis points, which is another record decline in the survey. It appears that borrowers in later stages of delinquency are recovering due to several factors, including improved employment and other economic conditions, the availability of home retention workout options after forbearance, and a strong housing market that is bringing additional alternatives to distressed homeowners.”

Walsh noted foreclosure moratoria were still in place through the second quarter, resulting in the lowest foreclosure inventory recorded since 1981.

“Once the foreclosure moratoria lift, and forbearance plans expire over the course of the next several months, we expect many homeowners to take advantage of available workout options to avoid the foreclosure process,” Walsh said.

Other key findings of MBA’s Second Quarter of 2021 National Delinquency Survey:

–Compared to last quarter, the seasonally adjusted mortgage delinquency rate decreased for all loans outstanding. By stage, the 30-day delinquency rate decreased 5 basis points to 1.41 percent and the 60-day delinquency rate decreased 15 basis points to 0.52 percent, both at their lowest levels in the history of the survey. The 90-day delinquency bucket decreased 72 basis points to 3.53 percent. 

–By loan type, the total delinquency rate for conventional loans decreased 68 basis points to 3.89 percent over the previous quarter. The FHA delinquency rate decreased 190 basis points to 12.77 percent, while the VA delinquency rate decreased by 115 basis points to 6.47 percent over the previous quarter. For each of these three loan types, the delinquency rate reached the lowest level since first quarter 2020.  

–On a year-over-year basis, total mortgage delinquencies decreased for all loans outstanding. The delinquency rate decreased by 279 basis points for conventional loans, decreased 288 basis points for FHA loans and decreased 158 basis points for VA loans from the previous year.

–The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure. The percentage of loans in the foreclosure process at the end of the second quarter fell to 0.51 percent, down 3 basis points from the first quarter and 17 basis points from a year ago. This is the lowest foreclosure inventory rate since fourth quarter 1981. The percentage of loans on which foreclosure actions were started in the second quarter remained unchanged at 0.04 percent.

–The non-seasonally adjusted seriously delinquent rate (the percentage of loans 90 days or more past due or in the process of foreclosure) fell to 4.03 percent. It decreased by 67 basis points from last quarter and  decreased by 23 basis points from last year. The seriously delinquent rate decreased 47 basis points for conventional loans, by 152 basis points for FHA loans and by 57 basis points for VA loans from the previous quarter. Compared to a year ago, the seriously delinquent rate decreased by 61 basis points for conventional loans, increased 152 basis points for FHA loans and increased 104 basis points for VA loans.

–States with the largest decreases in their overall delinquency rate from last quarter were Hawaii (81 basis points), New Jersey (85 basis points), Florida (94 basis points), Nevada (105 basis points) and Idaho (152 basis points).

–An estimated 1.6 million homeowners were on forbearance plans as of August 8. As previously stated, for the purposes of this survey, MBA asks servicers to report the loans in forbearance as delinquent if the payment was not made based on the original terms of the mortgage. 

MBA produces the National Delinquency Survey, which covers 38 million loans on one- to four- unit residential properties. Loans surveyed were reported by more than 100 servicers, including independent mortgage companies and depositories such as large banks, community banks and credit unions.