The fall hurricanes pushed up the mortgage delinquency rate to 5.17% of all mortgages in the fourth quarter of 2017, an increase of 29 basis points compared with the third quarter and an increase of 37 basis points compared with one year earlier, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey.
Although the percentage of loans that were 60 and 90 days past due increased, the percentage in early stage delinquency (30 days past due) decreased compared with the previous quarter and compared with a year earlier.
“The 30-day delinquency rate actually dropped by 15 basis points in the fourth quarter, as homeowners affected by Hurricanes Harvey, Irma and Maria either became current on their payments or moved to later stages of delinquency,” says Marina Walsh, vice president of industry analysis for the MBA, in a release. “However, while the earliest-stage delinquency rate dropped, the 60-day and 90-day delinquency rates did increase. Despite the hurricanes and these quarter-over-quarter results, most states are seeing overall mortgage delinquency rates at lower levels than a year ago.”
Foreclosure starts, as of the end of the fourth quarter, stood at about 0.25% of all loans, unchanged from the previous quarter and three basis points lower than one year earlier.
The percentage of loans in the foreclosure process at the end of the fourth quarter was 1.19%, down four basis points from the previous quarter and down 34 basis points compared with a year earlier.
“The FHA overall delinquency rate in the fourth quarter of 2017 is higher compared to the fourth quarter of 2016 in all but three states,” Walsh says. “FHA borrowers appear to be impacted not only by the storms but other factors that could be stretching their ability to make payments.
“Regardless of the hurricanes, an increase in delinquencies – particularly FHA delinquencies – off historic lows is not particularly surprising given the seasoning of the loan portfolio, expected higher interest rates, declining average credit scores on new FHA endorsements since 2014 and rising debt-to-income ratios,” she adds. “Mitigating factors include low unemployment and increasing home equity levels that provide homeowners with more options to cure a potential default.”
Because the FHA and government-sponsored enterprises Fannie Mae and Freddie Mac have enacted moratoria on foreclosure actions for homeowners whose properties are located in the storm ravaged areas, that means it will take several more quarters before the full impact on delinquencies/foreclosures can be be realized.
“Storm-related foreclosure moratoria continue to play a large factor in keeping foreclosure starts at bay, as the fourth quarter saw little movement in either foreclosure starts, or foreclosure inventory,” Walsh says. “As forbearance periods expire, an increase in the percent of loans in foreclosure is likely. We anticipate it will be several more quarters before the effects of the September hurricanes on the survey results dissipate, especially given extended forbearance periods.”
The serious delinquency rate (90 days or more past due or in the process of foreclosure), was 2.91% in the fourth quarter, up 39 basis points compared with the previous quarter, but still 22 basis points lower than one year earlier.
The increase in the serious delinquency rate was due primarily to the storms, which hit in late August and September.
The MBA notes in its report that the greater Houston area “appears to be further along on a path towards recovery.” It had a delinquency rate of 7.33% as of the end of the fourth quarter. Storm impacted areas in Florida, however, made up most the storm-related delinquencies in the fourth quarter. Storm impacted areas there had a delinquency rate of 8.89%.