MBA: Delinquencies, Foreclosures Down Again in 3Q

The Mortgage Bankers Association said mortgage delinquency rates fell in the third quarter to their lowest level since 2006, while foreclosure starts reached their lowest level since 2000.

The MBA 3rd Quarter National Delinquency Survey reported the delinquency rate for mortgage loans on one-to-four-unit residential properties decreased by 14 basis points to a seasonally adjusted rate of 4.52 percent of all loans outstanding at the end of the third quarter, the lowest level since second quarter 2006 (4.39 percent). From a year ago, the delinquency rate fell by 47 basis points

MBA said the percentage of loans on which foreclosure actions started during the third quarter fell to 0.30 percent, a decrease of two basis points from the previous quarter and down by eight basis points from one year ago to its lowest level since second quarter 2000.

The delinquency rate includes loans 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 third quarter fell to 1.55 percent, down by nine basis points from the previous quarter and 33 basis points lower than one year ago. The foreclosure inventory rate reached its lowest level since second quarter 2007.

The serious delinquency rate (the percentage of loans that are 90 days or more past due or in the process of foreclosure) fell to 2.96 percent, a decrease of 15 basis points from previous quarter and down by 61 basis points from a year ago. The serious delinquency rate fell to its lowest level since third quarter 2007.

“Mortgage delinquency and foreclosure rates continued to decrease in the third quarter as sustained job growth and low unemployment helped more borrowers stay current with their mortgage payments,” said MBA Vice President of Industry Analysis Marina Walsh. “Monthly job growth averaged 206,000 jobs in the third quarter, making it the strongest quarter in 2016 thus far. The unemployment rate stayed just below 5 percent and wage growth continued to strengthen. These factors helped the mortgage delinquency rate improve to 4.52 percent in the third quarter.”

Walsh noted the delinquency rate has decreased in nearly every quarter since early 2013 and is below its historical average of 5.36 percent from 1979 to the present. “Combined, the 30-day and 60-day delinquency rate was at its lowest level in the history of the survey dating back to 1979,” she said.

MBA reported among various loan types, the delinquency rate improved for conventional loans as well as FHA and VA loans. The FHA delinquency rate dropped to 8.30 percent, its lowest level since fourth quarter 1997, while the VA delinquency rate decreased to 3.89 percent, the lowest level in the survey dating back to 1979.

The percentage of new foreclosures initiated in the third quarter fell to 0.30, making it the lowest rate since 2000 and below the historical average rate of 0.44 percent. FHA loans saw a six basis point increase in foreclosure starts, although at 0.54 percent the rate remains below the historical average of 0.60 percent.

Continuing a downward trend that began in 2012, the foreclosure inventory rate declined to 1.55 percent in the third quarter. The percentage of loans in foreclosure continued to run higher in judicial foreclosure states than in states that use a non-judicial foreclosure process and states that use both processes. Regardless, the foreclosure inventory rate continued to decline across the board.

MBA also reported 48 states either had no change or saw declines in the foreclosure inventory rate in the third quarter. New Jersey and New York had the highest percentage of loans in foreclosure, at 5.79 and 4.32, respectively, but both states saw double-digit basis point decreases from the previous quarter.

Beginning earlier this year, MBA combined all non-government loans into a single conventional loan category. Conventional loans make up nearly 80 percent of the NDS sample.

The NDS, conducted by MBA since 1953, covers 38 million loans on one- to four- unit residential properties. Loans surveyed were reported by more than 100 lenders, including mortgage bank, commercial banks and thrifts.