The delinquency rate for mortgage loans on one-to-four-unit residential properties climbed to a seasonally adjusted rate of 3.88% at the end of the fourth quarter of 2023, according to the Mortgage Bankers Association.
The increase, up 26 basis points from the third quarter of 2023, marks a concerning trend despite a slight eight basis point decrease from the previous year. Notably, delinquencies on FHA loans surged by 131 basis points, signaling potential challenges in certain market segments.
The percentage of loans on which foreclosure actions were initiated remained stable at 0.14%.
“Mortgage delinquencies increased across all product types for the second consecutive quarter,” MBA’s Vice President of Industry Analysis Marina Walsh said. “While the overall delinquency rate is still very low compared to the historical average, the pace of new loans entering delinquency picked up and some loans moved into later stages of delinquency. The resumption of student loan payments, robust personal spending, and rising balances on credit cards and other forms of consumer debt, paired with declining savings rates, are likely behind some borrowers falling behind at the end of 2023.”
Walsh attributed these trends to various economic factors, including the resumption of student loan payments, increased consumer spending, rising credit card balances, and declining savings rates. Additionally, she pointed to the resilience of the labor market, with the unemployment rate holding steady at 3.7% in January.
However, Walsh cautioned that any deterioration in employment conditions could exacerbate mortgage delinquencies in the coming quarters, underscoring the importance of continued monitoring and proactive measures to address potential challenges in the housing market.
