Delinquency Rates Up, Average FICO Scores Drop

February 15, 2017
There was a bit of an awkward seesaw ride taking place in newly released mortgage data, with the delinquency rate taking an uptick while the average FICO score level headed south
There was a bit of an awkward seesaw ride taking place in newly released mortgage data, with the delinquency rate taking an uptick while the average FICO score level headed south.
 
The delinquency rate for mortgages on one-to-four-unit residential properties increased to a seasonally adjusted rate of 4.80 percent of all loans outstanding at the end of the fourth quarter of 2016, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey. The fourth quarter delinquency rate was 28 basis points above the previous quarter and three basis points higher than the fourth quarter of 2015.
 
The percentage of loans on which foreclosure actions were started during the fourth quarter was 0.28 percent, down two basis points from the previous quarter and down eight basis points from a year earlier; the fourth quarter saw the lowest rate of new foreclosures started since the fourth quarter of 1988. The percentage of loans in the foreclosure process at the end of the fourth quarter was 1.53 percent, down two basis points from the third quarter and 24 basis points below the further quarter of 2015—the lowest foreclosure inventory rate since the second quarter of 2007.
The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 3.13 percent, up 17 basis points from last quarter but down 31 basis points from last year.
 
“The overall delinquency rate in the fourth quarter increased across all loan types—FHA, VA and conventional—as compared to the third quarter,” said Marina Walsh, MBA’s vice president of industry analysis, “However, it should be noted that last quarter’s overall delinquency rate was at its lowest level since 2006. It is not unexpected that delinquencies could eventually increase off such a low base. We continue to see strong fundamentals in the overall economy, such as rising home values and increased employment, which bodes well for the future performance of FHA, VA and conventional loans.”
 
Separately, new data from Ellie Mae found average FICO scores taking a downward motion in January. Average FICO scores decreased from 726 in December to 722 in January, with conventional refinance FICO scores falling from 739 to 732, FHA refinance FICO scores tumbling from 654 to 651 and VA refinance FICO scores dipping from 709 to 707.
 
Also falling were home loans for purchases, taking a slight step down from 54 percent of all closed loans in December to 53 percent in January. But refinances took the opposite direction, representing 47 percent of closed loans in the month, up slightly from 46 percent the month prior. Closing rates for all loans decreased slightly to 72.2 percent, down from the high of 73.2 percent in December, and the average time to close all loans increased to 51 days in January up from 50 days the month before. 
 
“Rates continued to increase in January and with that we began to see an uptick in adjustable rate mortgages, a trend that we will watch throughout the year,” said Jonathan Corr, president and CEO of Ellie Mae. “Additionally, FICO scores began to drop slightly across the board, while closing rates remained high as homebuyers locked in rates to close their loans.” 
Trends