MBA: 3Q Mortgage Delinquencies Rise on Natural Disaster Impact

Mortgage delinquency rates rose slightly in the third quarter as summer national disasters impacted results in some states, the Mortgage Bankers Association reported Thursday.

The MBA 3Q National Delinquency Survey reported the delinquency rate for mortgage loans on one-to-four-unit residential properties rose to a seasonally adjusted rate of 4.47 percent of all loans outstanding, up 11 basis points from the previous quarter, but down 41 basis points from one year ago. The percentage of loans on which foreclosure actions were started dropped one basis point from the second quarter to 0.23 percent, its lowest level since fourth quarter 1985.

The report said natural disasters were a major factor in determining whether borrowers make timely mortgage payments. Specifically, there were significant delinquency increases in states adversely impacted by Hurricane Florence and Tropical Storm Gordon, including North Carolina, South Carolina, Mississippi, Arkansas and Alabama. Hurricane Michael, which made landfall after the survey reporting period, will not be reflected until MBA’s fourth quarter survey.

“Despite the small uptick this quarter, the healthy economy is overall supporting low mortgage delinquencies and foreclosure inventories,” said MBA Vice President of Industry Analysis Marina Walsh. “Unemployment is at its lowest levels since 1969, wages have grown 3.1 percent year-over-year–the biggest jump in almost a decade–and job growth is averaging over 212,000 jobs per month thus far.”

Walsh said it will likely take several quarters for the most recent storms’ effects on the survey results to dissipate. “The impact of the August and September 2017 hurricanes on several states, particularly Texas and Florida, continues to retreat,” she said. “Primarily because of the declining effects of last fall’s hurricane-related spike, the overall mortgage delinquency rate in the third quarter was down 41 basis points on a year-over-year basis.”

Key survey findings:
–The 30-day delinquency rate increased 20 basis points to 2.51 percent from the second quarter; the 60-day delinquency rate increased by 2 basis points to 0.77 percent; and the 90-day delinquency bucket dropped by 11 basis points to 1.18 percent.

–Mortgage delinquencies rose across all loan types from the second quarter. The delinquency rate for conventional loans increased by 11 basis points to 3.56 percent; the FHA delinquency rate increased by 26 basis points to 8.96 percent; and the VA delinquency rate increased by 19 basis points, to 4.16 percent.

–On a year-over-year basis, mortgage delinquencies dropped across all loan types. The delinquency rate for conventional loans dropped by 41 basis points, while the FHA and VA delinquency rates dropped 44 basis points and 8 basis points, respectively.

–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 third quarter was 0.99 percent, down 6 basis points from the second quarter and 24 basis points lower than one year ago. This was the lowest foreclosure inventory rate since second quarter 2006.

–The serious delinquency rate (the percentage of loans 90 days or more past due or in the process of foreclosure) fell to 2.13 percent, a decrease of 17 basis points from second quarter and a decrease of 39 basis points from a year ago.

–States with the largest increases in non-seasonally-adjusted mortgage delinquency rates over the previous quarter were all impacted by the September storms: North Carolina (80 basis points), South Carolina (77 basis points), Mississippi (77 basis points), Arkansas (63 basis points) and Alabama (50 basis points).

–Both Texas and Florida continue to recover from the September 2017 hurricanes. The non-seasonally-adjusted overall mortgage delinquency rate in Texas dropped 190 basis points from last year to 5.48 percent in the third quarter. In Florida, the non-seasonally-adjusted overall mortgage delinquency rate on all loans dropped 243 basis points from last year to 4.59 percent.

The NDS, conducted 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.