MBA: 1Q Mortgage Delinquencies Increase; Foreclosure Inventories Remain Low

Mortgage delinquencies rose in the first quarter, the Mortgage Bankers Association reported last week, while foreclosure inventories remained at nearly 25-year lows.

The MBA National Delinquency Survey reported the delinquency rate for mortgage loans on one-to-four-unit residential properties rose to a seasonally adjusted rate of 4.42 percent of all loans outstanding at the end of the first quarter. Despite the 36 basis point uptick on a quarterly basis, the delinquency rate fell by 21 basis points from a year ago. The percentage of loans on which foreclosure actions were started last quarter fell by 5 basis points from a year ago and by 2 basis points from the fourth quarter (to 0.23 percent).

“The national mortgage delinquency rate in the first quarter of 2019 was down on a year-over-year basis, which is another sign of a very strong economic environment, bolstered by low unemployment and rising wage growth,” said Marina Walsh, MBA Vice President of Industry Analysis. “Moreover, the serious delinquency rate–the percentage of loans that are 90 days or more past due or in the process of foreclosure–dropped across all loan types from the previous quarter and a year ago to its lowest overall level since the second quarter of 2006.”

Walsh noted early 30-day delinquencies rose in the first quarter on a seasonally-adjusted basis across all loan types. While higher than several quarters in 2017 and 2018, it is still the fourth lowest overall mortgage delinquency rate in the past 12 years.

Other key report findings:

–From the fourth quarter, the seasonally adjusted mortgage delinquency rate increased for all loans outstanding. By stage, the 30-day delinquency rate increased by 29 basis points to 2.58 percent; the 60-day delinquency rate increased by 7 basis points to 0.81 percent; and the 90-day delinquency bucket remained unchanged at 1.03 percent.

–By loan type, the total delinquency rate for conventional loans increased by 27 basis points to 3.46 percent from the fourth quarter.The FHA delinquency rate increased by 28 basis points to 8.93 percent; and the VA delinquency rate increased by 66 basis points to 4.37 percent.

–On a year-over-year basis, the seasonally adjusted overall delinquency rate decreased for all loans outstanding. The delinquency rate decreased by 32 basis points for conventional loans, by 9 basis points for FHA loans and increased by 5 basis points for VA loans.

–The percentage of loans in the foreclosure process at the end of the first quarter fell to 0.92 percent, down by 3 basis points from the fourth quarter and by 24 basis points from a year ago, the lowest foreclosure inventory rate since the fourth quarter of 1995.

–The serious delinquency rate–the percentage of loans that are 90 days or more past due or in the process of foreclosure–fell to 1.96 percent, a decrease of 10 basis points from the fourth quarter and 65 basis points from a year ago. The serious delinquency rate decreased by 6 basis points for conventional loans; by 31 basis points for FHA loans; and by 9 basis points for VA loans. From a year ago, the serious delinquency rate decreased by 67 basis points for conventional loans, by 77 basis points for FHA loans and by 35 basis points for VA loans.

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.

In a separate report, CoreLogic, Irvine, Calif., said 4% of mortgages were in some stage of delinquency (30 days or more past due, including those in foreclosure) in February, representing an 0.8 percentage point decline from a year, when it was 4.8%. This was the lowest for the month of February in at least 19 years.

CoreLogic said as of February, the foreclosure inventory rate stood at 0.4%, down 0.2 percentage points from a year ago. The February 2019 foreclosure inventory rate tied the November and December 2018 and January 2019 rates as the lowest for any month since at least January 1999.

The report said the rate for early-stage delinquencies (30-59 days past due) fell to 2% in February, down from 2.1% a year ago. The share of mortgages 60-89 days past due fell to 0.6%, down from 0.7% a year ago. The serious delinquency rate (90 days or more past due, including loans in foreclosure) fell to 1.4% in February, down from 2.1% a year ago, the lowest for that month since 2001.

“The persistently impressive economic expansion continues to drive down housing market distress, with delinquencies and foreclosures hitting near two-decade lows,” said Ralph McLaughlin, deputy chief economist with CoreLogic. “Furthermore, with unemployment at a 50-year low, wage growth nearing double inflation and a positive demographic structure that will drive housing demand upwards, the future of U.S. housing and mortgage markets look bright even if short term indicators suggest cooling.”