The delinquency rate for mortgage loans on one-to-four-unit residential properties decreased to a seasonally adjusted rate of 4.88 percent of all loans outstanding at the end of the third quarter of 2021, 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 59 basis points from the second quarter of 2021 and down 277 basis points from one year ago.
“For the fifth consecutive quarter, the mortgage delinquency rate declined, commensurate with a decline in the U.S. unemployment rate over the same time period,” says Marina Walsh, CMB, MBA’s vice president of industry analysis. “The improvement was driven entirely by a decline in later-stage delinquent loans – those loans that are 90 days or past due, but not in foreclosure. By the end of the third quarter, many borrowers were approaching the 18-month expiration point of their forbearance terms and were being placed in permanent home retention solutions, such as modifications and loan deferrals.”
“Once these borrowers entered permanent post-forbearance workouts and resumed payments, they moved from delinquent to current status,” Walsh adds. He also noted that while the impact of the COVID-19 pandemic is waning, there are regional differences and other reasons for homeowner distress. For example, the mortgage delinquency rate in Louisiana increased by 118 basis points in the third quarter from the damage and displacement caused by Hurricane Ida’s August landfall. Furthermore, a 3 basis-point increase in the delinquency rate was reported in Wyoming because of wildfires. These factors may have played a role in the slight uptick in earlier-stage delinquencies at the national level.
“The effects so far have been muted from the July 31 end-date of the foreclosure moratorium on federally-backed loans,” continues Walsh. “The foreclosure starts rate matched an all-time survey low first reached in 2020, and the foreclosure inventory rate dropped again. Homeowners, investors and servicers have better options than proceeding with a costly and time-consuming foreclosure process.”
Compared to last quarter, the seasonally adjusted mortgage delinquency rate decreased for all loans outstanding. By stage, the 30-day delinquency rate increased 10 basis points to 1.51%, the 60-day delinquency rate remained unchanged at 0.52%, and the 90-day delinquency bucket decreased 68 basis points to 2.85%.
By loan type, the total delinquency rate for conventional loans decreased 34 basis points to 3.55% over the previous quarter. The FHA delinquency rate decreased 143 basis points to 11.34%, and the VA delinquency rate decreased by 66 basis points to 5.81%. For each of these three loan types, the delinquency rate reached the lowest level since the first quarter of 2020.
On a year-over-year basis, total mortgage delinquencies decreased for all loans outstanding. The delinquency rate decreased by 238 basis points for conventional loans, decreased 425 basis points for FHA loans, and decreased 235 basis points for VA loans from the previous year.
The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure. The percentage of loans in the foreclosure process at the end of the third quarter was 0.46%, down 5 basis points from the second quarter of 2021 and 13 basis points lower than one year ago. This is the lowest foreclosure inventory rate since the fourth quarter of 1981. The percentage of loans on which foreclosure actions were started in the third quarter fell by 1 basis point to 0.03%, which is the lowest starts rate reported in the survey and consistent with the last three quarters of 2020.
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 3.40%. It decreased by 63 basis points from last quarter and decreased by 176 basis points from last year. The seriously delinquent rate decreased 49 basis points for conventional loans, decreased 129 basis points for FHA loans, and decreased 54 basis points for VA loans from the previous quarter. Compared to a year ago, the seriously delinquent rate decreased by 156 basis points for conventional loans, decreased 257 basis points for FHA loans, and decreased 129 basis points for VA loans.
The five states with the largest quarterly decreases in their overall delinquency rate were Nevada (98 basis points), Hawaii (83 basis points), New Jersey (74 basis points), Maryland (72 basis points) and Connecticut (71 basis points).
The five states with either quarterly increases or the smallest quarterly decreases in their overall delinquency rate were Louisiana (118 basis points increase), Wyoming (3 basis points increase), Iowa (5 basis points decrease), Montana (10 basis points decrease) and West Virginia (14 basis points decrease).
An estimated 1 million homeowners were on forbearance plans as of October 31, 2021. As previously stated, for the purposes of this survey, MBA asks servicers to report the loans in forbearance as delinquent if the payment was not made based on the original terms of the mortgage.