The residential mortgage delinquency rate stood at about 7.65% as of the end of the third quarter, down 57 basis points compared with the second quarter but up 368 basis points from one year ago, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey.
For the purposes of the survey, the MBA asks servicers to report loans in forbearance as delinquent if the payment was not made based on the original terms of the mortgage.
“Consistent with the improving labor market and the overall economic rebound, homeowners’ ability to make their mortgage payments improved in the third quarter,” says Marina Walsh, vice president of industry analysis for the MBA, in a statement. “The decrease in the mortgage delinquency rate was driven by a sharp decline in newer 30-day delinquencies and 60-day delinquencies. Particularly encouraging was the 30-day delinquency rate, which reached its lowest level since MBA’s survey began in 1979.
“Nonetheless, the 90-day and over delinquency rate continued to grow and reached its highest level since the second quarter of 2010,” Walsh adds. “With forbearance plans still active and foreclosure moratoriums in place until at least the end of the year, many borrowers experiencing longer-term distress will remain in this delinquency category until a loss mitigation resolution is available.”
Certain homeowners, particularly those with FHA and VA loans, continue to be disproportionately impacted by the pandemic-driven crisis, Walsh says.
The FHA delinquency rate dropped slightly in the third quarter but was still at its second-highest rate in the survey.
Furthermore, the FHA seriously delinquent rate – the percentage of loans that are 90 days or more past due or in the process of foreclosure – reached a survey-high 10.76%.
“There are no guarantees that last quarter’s improvement in the delinquency rate will continue,” Walsh says. “Recent actions to combat another wave of COVID-19 cases could slow or halt the recovery in some sectors – particularly the service industries – and the passage of another stimulus package is still uncertain.
“Despite this ongoing concern, steady home-price gains and homeowner equity accumulation seen in most of the country in the last several years potentially work in favor for distressed borrowers,” Walsh adds. “We continue to encourage them to reach out to their mortgage servicer as soon as possible to discuss their options.”