Mortgage Delinquencies Edge Upward In Third Quarter
Early-stage delinquencies rise according to MBA's report, while foreclosure starts stay low, suggesting resilience in the housing market despite concerns over increasing unemployment rates.
The Mortgage Bankers Association’s latest National Delinquency Survey revealed an increase in the delinquency rate of mortgage loans for one-to-four-unit residential properties in the third quarter of 2023. The seasonally adjusted delinquency rate rose to 3.62%, marking an increase from both the previous quarter and the same period last year.
“The national mortgage delinquency rate increased in the third quarter from the record survey low reached in the second quarter of this year, with an uptick in delinquencies across all loan types – conventional, FHA, and VA,” MBA’s Vice President of Industry Analysis Marina Walsh said. “The increase was driven entirely by a rise in earliest-stage delinquencies – those 30-days and 60-days past due. Later-stage delinquencies – those 90 days or more past due – declined to the lowest level since the first quarter of 2020.”
Despite the slight rise in foreclosure starts to 0.14%, this rate remains well below the historical average, indicating a continued strength in the housing market’s ability to cope with borrower distress. The survey also highlighted a close correlation between mortgage delinquencies and employment conditions. With a recent uptick in the unemployment rate and projections of further economic softening, there is an expectation that mortgage delinquencies might continue to rise, especially among FHA borrowers who saw the sharpest increase this quarter.
The delinquency rates varied by loan type, with FHA loans experiencing the largest increase in delinquencies, followed by conventional and VA loans. On a state level, South Dakota, New Mexico, Hawaii, Mississippi, and Louisiana saw the most significant rises in delinquency rates.
The data reflects that loans in forbearance were reported as delinquent if the payment was not made according to the original mortgage terms, which may have contributed to the uptick in reported delinquencies. The percentage of loans in the foreclosure process is at its lowest since the fourth quarter of 2021, and the non-seasonally adjusted seriously delinquent rate is the lowest since 1984, showing signs of a robust underlying market.