Chart of the Week: Mortgage Delinquency Rate Spreads by Product Type
Source: MBA’s National Delinquency Survey, www.mba.org/nds
According to the latest results from MBA’s National Delinquency Survey (NDS), the overall delinquency rate for mortgage loans on one‐to‐four‐unit residential properties increased to a seasonally adjusted rate of 3.98% of all loans outstanding at the end of the fourth quarter of 2024.
The delinquency rate was up 10 basis points from one year ago. Although mortgage delinquencies rose only 10 basis points in the fourth quarter of 2024 compared to one year ago, the composition of the delinquencies changed. Conventional delinquencies remained near historical lows at 2.62%, but FHA and VA delinquencies increased at a faster pace, reaching 11.03% and 4.70% respectively.
In this Chart of the Week, we show the historical basis-point spread between the FHA and VA delinquency rates relative to the conventional delinquency rate. From 2004-2024, this spread relative to conventional loans was 636 basis points for FHA and 98 basis points for VA. At the end of fourth quarter, the spread between the FHA and conventional delinquency rates reached 841 basis points, while the VA and conventional spread was 208 basis points – both higher than the historical average. Not since the height of the pandemic have the delinquency spreads been this wide.
Government loans are also rolling to later stages of delinquency. Compared to one year ago, the seriously delinquent rate rose seventy basis points for FHA loans and fifty-seven basis points for VA loans, but only two basis points for conventional loans.
While the labor market remains relatively strong and often tracks with mortgage performance, some of today’s headwinds include inflationary pressures, lower personal savings rates, natural disasters, increasing consumer debt, higher tax and insurance payments, and higher debt-to-income ratios. All of these factors may be impacting government borrowers to a greater extent than conventional borrowers.
— Marina B Walsh, CMB (mwalsh@mba.org); Anh Doan (adoan@mba.org)
