The delinquency rate for mortgage loans on one-to-four-unit residential properties decreased to a seasonally adjusted rate of 3.45% of all loans outstanding at the end of the third quarter of 2022, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey.
For the purposes of the survey, MBA asks servicers to report loans in forbearance as delinquent if the payment was not made based on the original terms of the mortgage. The delinquency rate was down 19 basis points from the second quarter of 2022 and down 143 basis points from one year ago.
“For the second quarter in a row, the mortgage delinquency rate fell to its lowest level since MBA’s survey began in 1979 – declining to 3.45 percent. Foreclosure starts and loans in the process of foreclosure also dropped in the third quarter to levels further below their historical averages,” says Marina Walsh, CMB, MBA’s vice president of industry analysis. “The relatively small number of seriously delinquent homeowners are working with their mortgage servicers to find foreclosure alternatives, including loan workouts that allow for home retention.”
Looking ahead, Walsh notes that MBA’s latest forecast calls for a recession in the first half of 2023, driven by tighter financial conditions, reduced business investment, and slower global growth. As a result, the unemployment rate is expected to reach 5.5% by the end of next year, almost 200 basis points higher than the estimated 3.7% rate in October 2022.
“The delinquency rate will likely increase in upcoming quarters from its current record low because of both the anticipated uptick in unemployment and the effect of natural disasters like Hurricane Ian in Florida, South Carolina and other states, which will likely result in an increase in forbearance agreements to allow impacted homeowners to get back on their feet,” adds Walsh.
Compared to second-quarter 2022, the seasonally adjusted mortgage delinquency rate decreased for all loans outstanding to 3.45%, the lowest level in the history of the survey dating back to 1979. By stage, the 30-day delinquency rate remained unchanged at 1.66%, the 60-day delinquency rate increased 4 basis points to 0.53%, and the 90-day delinquency bucket decreased 22 basis points to 1.27%.
By loan type, the total delinquency rate for conventional loans decreased 12 basis points from the previous quarter to 2.52%. The FHA delinquency rate decreased 33 basis points to 8.52%, and the VA delinquency rate decreased by 51 basis points to 3.71%.
On a year-over-year basis, total mortgage delinquencies decreased for all loans outstanding. The delinquency rate decreased by 103 basis points for conventional loans, decreased 282 basis points for FHA loans, and decreased 210 basis points for VA loans.
The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure. For much of the last two years, foreclosure moratoria were in place, which kept these numbers artificially low.
The percentage of loans in the foreclosure process at the end of the third quarter of 2022 was 0.56%, down 3 basis points from the second quarter of 2022, and 10 basis points higher than one year ago. The percentage of loans on which foreclosure actions were started in the third quarter fell by 3 basis points to 0.15%.
The non-seasonally adjusted seriously delinquent rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 1.90%. It decreased by 22 basis points from last quarter and decreased by 150 basis points from one year ago. The seriously delinquent rate decreased 18 basis points for conventional loans, decreased 38 basis points for FHA loans, and decreased 32 basis points for VA loans from the previous quarter. Compared to a year ago, the seriously delinquent rate decreased by 96 basis points for conventional loans, decreased 393 basis points for FHA loans, and decreased 197 basis points for VA loans.
The five states with the largest quarterly decreases in their overall delinquency rate were Alaska (102 basis points), Hawaii (32 basis points), Maine (31 basis points), Rhode Island (29 basis points) and Connecticut (29 basis points).