ICE First Look: New Default Activity Posts Annual Decline, Led by FHA Loans

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Early-stage delinquencies remain low, according to Intercontinental Exchange, Atlanta. Notably, new FHA defaults posted their largest annual decline in more than four years.

“Overall performance remained strong in June,” noted Andy Walden, head of mortgage and housing market research at ICE. “Early-stage delinquencies remain subdued, and while serious delinquencies including foreclosures have reached pre-pandemic levels, new default activity has leveled off in recent months — a positive sign.”

Walden said new FHA defaults–which have been a focal point of market attention–were down 15% year over year in June. “These trends are encouraging, even as the market continues to warrant close monitoring,” he said.

Other key takeaways from the report include:

• Delinquencies rose modestly, remaining below pre-pandemic levels: The national delinquency rate rose 5 basis points to 3.55% in June, roughly half the typical seasonal rise. The rate remains 60 basis points below the June 2019 pre-pandemic benchmark of 4.16%.

• Late-stage delinquencies declined to a six-month low: Serious delinquencies (90-plus days past due but not in foreclosure) fell to 570,000, extending the seasonal improvement that began in March.

• New default activity declined: New default volumes have stabilized in recent months, and new FHA defaults were down 15% year over year in June, their largest annual decline in more than four years.

• Roll rates improved across early delinquency stages: The number of borrowers becoming 30- and 60-days delinquent fell in June on both a monthly and annual basis.

• Foreclosure activity continues to slowly trend higher: The share of mortgages in active foreclosure reached 0.53% in June, the highest level in six years, as foreclosure activity continued to normalize. Foreclosure starts hit a six-year high, and foreclosure sales were up 16% from a year ago, though they remained 46% below pre-pandemic levels.

• Prepayment speeds eased: Single-month mortality eased 2 basis points to 0.77%, a five-month low, as mortgage rates remained elevated, though June’s SMM remained 12 basis points above year-ago levels.