MBA: Mortgage Delinquencies Decrease in 3Q

Mortgage delinquency and foreclosure rates fell in the third quarter, the Mortgage Bankers Association reported in its quarterly National Delinquency Survey.

MBA reported the delinquency rate for mortgage loans on one-to-four-unit residential properties decreased to a seasonally adjusted rate of 7.65 percent of all loans outstanding at the end of the third quarter, down 57 basis points from the second quarter but up 368 basis points from one year ago.

Marina Walsh,

“Consistent with the improving labor market and the overall economic rebound, homeowners’ ability to make their mortgage payments improved in the third quarter,” said Marina Walsh, CMB, MBA Vice President of Industry Analysis. “The decrease in the mortgage delinquency rate was driven by a sharp decline in newer 30-day delinquencies and 60-day delinquencies. Particularly encouraging was the 30-day delinquency rate, which reached its lowest level since MBA’s survey began in 1979.”

Walsh noted, however, the 90-day and over delinquency rate continued to grow and reached its highest level since second quarter 2010. “With forbearance plans still active and foreclosure moratoriums in place until at least the end of the year, many borrowers experiencing longer-term distress will remain in this delinquency category until a loss mitigation resolution is available,” she said.

The report said certain homeowners, particularly those with FHA and VA loans, continue to be disproportionately impacted by the pandemic-driven crisis. The FHA delinquency rate dropped slightly in the third quarter but remained at its second-highest rate in the survey, Additionally, the FHA seriously delinquent rate – the percentage of loans 90 days or more past due or in the process of foreclosure – reached a survey-high 10.76 percent.

“There are no guarantees that last quarter’s improvement in the delinquency rate will continue,” Walsh said. “Recent actions to combat another wave of COVID-19 cases could slow or halt the recovery in some areas – particularly the service industries – and the passage of another stimulus package is still uncertain. Despite this ongoing concern, steady home-price gains and homeowner equity accumulation seen in most of the country in the last several years potentially work in the favor for borrowers in distress. We continue to encourage distressed borrowers to reach out to their mortgage servicer as soon as possible to discuss their options.” 

For the purposes of the survey, MBA asks servicers to report loans in forbearance as delinquent if the payment was not made based on the original terms of the mortgage.  

Other key survey findings:

–Compared to last quarter, the seasonally adjusted mortgage delinquency rate decreased for all loans outstanding. By stage, the 30-day delinquency rate decreased 48 basis points to 1.86 percent, the lowest rate since the survey began in 1979. The 60-day delinquency rate decreased 113 basis points to 1.02 percent, and the 90-day delinquency bucket increased 106 basis points to 4.78 percent, the highest rate since second quarter 2010.

–By loan type, the total delinquency rate for conventional loans decreased 75 basis points to 5.93 percent over the previous quarter and  the FHA delinquency rate decreased 6 basis points to 15.59 percent. The VA delinquency rate increased by 11 basis points to 8.16 percent over the previous quarter, the highest level since first quarter 2009.

–On a year-over-year basis, total mortgage delinquencies increased for all loans outstanding. The delinquency rate increased by 293 basis points for conventional loans, by 737 basis points for FHA loans and by 423 basis points for VA loans.

–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 fell to 0.59 percent, down 9 basis points from the second quarter and 25 basis points lower than one year ago. This is the lowest foreclosure inventory rate since second quarter 1982.

–The percentage of loans on which foreclosure actions were started in the third quarter remained unchanged from last quarter at 0.03 percent.

–The seriously delinquent rate, the percentage of loans 90 days or more past due or in the process of foreclosure, rose to 5.16 percent, the highest rate since fourth quarter 2013. It increased by 90 basis points from last quarter and increased by 335 basis points from last year. The seriously delinquent rate increased by 46 basis points for conventional loans, by 280 basis points for FHA loans and by 179 basis points for VA loans. From a year ago, the seriously delinquent rate increased by 249 basis points for conventional loans, by 737 basis points for FHA loans and by 390 basis points for VA loans.

–States with largest decreases in their overall delinquency rate from the second quarter were New Jersey (-102 basis points), New York (-96 basis points), Alaska (-91 basis points), Florida (-74 basis points) and Nevada (-58 basis points).

–States with largest increases in their overall delinquency rate compared to a year ago were Nevada (556 basis points), New Jersey (510 basis points), Hawaii (503 basis points), Florida (502 basis points) and New York (493 basis points).

MBA estimated 3.4 million homeowners were on forbearance plans as of September 27. In its most recent Forbearance & Call Center Survey, MBA said that number had fallen to 2.8 million as of Nov. 1. 

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The above data were obtained in cooperation with the Mortgage Bankers Association, which produces the National Delinquency Survey. The NDS covers 39 million loans on one- to four- unit residential properties. Loans surveyed were reported by more than 100 servicers, including independent mortgage companies and depositories such as large banks, community banks and credit unions.