MBA Survey Reports Mortgage Delinquencies Down in 1st Quarter; Foreclosures Up Slightly

Mortgage delinquencies continued their downward trend in the first quarter, to pre-housing crisis lows, although the foreclosure rate rose slightly, the Mortgage Bankers Association reported last week.

The MBA 1st Quarter National Delinquency Report said the delinquency rate for mortgage loans on one-to-four-unit residential properties fell to a seasonally adjusted rate of 4.63 percent of all loans outstanding at the end of the first quarter, down by 54 basis points from the fourth quarter and eight basis points lower than a year ago.

MBA reported the percentage of loans on which foreclosure actions started during the first quarter rose slightly to 0.28 percent, up three basis points from the fourth quarter but down two basis points from one year ago.

MBA Vice President of Industry Analysis Marina Walsh said mortgage delinquencies decreased from the previous quarter across all loan types–conventional, VA and in particular, FHA–as the effects of last year’s hurricanes dissipated.

“The strong economy, low unemployment rate, tax refunds and bonuses and home price appreciation were key factors that helped push delinquencies down in the first quarter,” Walsh said. “Of course, there are offsetting factors that may put upward pressure on delinquency rates in future quarters, including a difficult recovery for some borrowers in hurricane-impacted states; the aging of loan portfolios; higher interest rates that limit a borrower’s rate-term refinance options; higher energy prices; stretching of housing affordability given limited supply; and the easing of credit overlays as mortgage market conditions have changed.”

Other survey findings:

–The FHA delinquency rate declined by 136 basis points over the previous quarter, the largest single-quarter decline reported for the NDS data series, although it rose by 93 basis points year over year. Conventional and VA delinquency rates declined by 41 basis points and 17 basis points, respectively, from the previous quarter.

–Year-over-year, the overall mortgage delinquency rate increased by 93 basis points for FHA loans; dropped by 26 basis points for conventional loans; and increased 42 basis points for VA loans.

–Mortgage delinquencies dropped across all stages of delinquency compared to the fourth quarter. The 30-day delinquency dropped 27 basis points from the previous quarter, while the 60-day and 90-day delinquency buckets dropped by 9 and 18 basis points, respectively.

–The percentage of loans in the foreclosure process at the end of the first quarter fell to 1.16 percent, down 3 basis points from the fourth quarter and 23 basis points lower than a year ago. This was the lowest foreclosure inventory rate since third quarter 2006. Walsh said in addition to the strong economy and increasing home equity levels, extended storm-related foreclosure moratoria continue to play a factor in keeping foreclosure inventory at historic lows.

–The serious delinquency rate (the percentage of loans that are 90 days or more past due or in the process of foreclosure) fell to 2.61 percent in the first quarter, a decrease of 30 basis points from the fourth quarter and a decrease of 15 basis points from a year ago.

–Both Texas and Florida appear to be past peak delinquencies that immediately followed the hurricanes. The non-seasonally adjusted overall mortgage delinquency rate in Texas dropped by 171 basis points to 5.62 percent in the first quarter. Prior to the hurricane in second quarter 2017, the overall delinquency rate for Texas was 5.05 percent. In Florida, the non-seasonally adjusted overall mortgage delinquency rate on all loans dropped by 230 basis points to 6.59 percent in the first quarter. Prior to the hurricane in second quarter 2017, the overall delinquency rate for Florida was 4.07 percent.

–Four of the five states with the highest 90+ day delinquency rate in the first quarter were impacted by the hurricanes: Florida, Mississippi, Louisiana and Texas. The other state was New Jersey.

While forbearance is in place for many borrowers affected by these storms, the MBA survey asks servicers to report these loans as delinquent if the payment was not made based on the original terms of the mortgage regardless of any forbearance plans in place.

The NDS, conducted since 1953, covers 39 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.