Mortgage Delinquencies Fall to Lowest Level in Nearly 25 Years

The delinquency rate for mortgage loans on one-to-fourunit residential properties decreased to a seasonally adjusted rate of 3.97 percent of all loans outstanding at the end of the third quarter of 2019, according to the Mortgage Bankers Association's (MBA) National Delinquency Survey.

The delinquency rate was down 56 basis points from the second quarter of 2019 and down 50 basis points from one year ago. The percentage of loans on which foreclosure actions were started in the third quarter fell by four basis points to 0.21 percent.

"Mortgage delinquencies decreased in the third quarter across all loan types - conventional, VA, and in particular, FHA," said Marina Walsh, MBA's Vice President of Industry Analysis. "The FHA delinquency rate dropped 100 basis points, as weather-related disruptions from the spring waned. The labor market remains healthy and economic growth has been stronger than anticipated. These two factors have contributed to the lowest level of overall delinquencies in almost 25 years."

Added Walsh, "Looking ahead, we do continue to monitor the credit profile of new FHA loans, as changes to this profile can have a noticeable impact on future delinquency rates."

Key findings of MBA's Third Quarter of 2019 National Delinquency Survey:

Compared to last quarter, the seasonally adjusted mortgage delinquency rate decreased for all loans outstanding to the lowest level since the first quarter of 1995. By stage, the 30-day delinquency rate decreased 42 basis points to 2.20 percent, the 60-day delinquency rate decreased six basis points to 0.75 percent, and the 90-day delinquency bucket decreased 8 basis points to 1.02 percent.
By loan type, the total delinquency rate for conventional loans decreased 61 basis points to 3.00 percent compared to the second quarter. The FHA delinquency rate decreased 100 basis points to 8.22 percent, and the VA delinquency rate decreased by 31 basis points to 3.93 percent.
On a year-over-year basis, total mortgage delinquencies decreased for all loans outstanding. The delinquency rate decreased by 56 basis points for conventional loans, decreased 74 basis points for FHA loans, and decreased 23 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. The percentage of loans in the foreclosure process at the end of the third quarter was 0.84 percent, down six basis points from the second quarter of 2019 and 15 basis points lower than one year ago. This is the lowest foreclosure inventory rate since the fourth quarter of 1985.
The seriously delinquent rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 1.81 percent - a decrease of 14 basis points from last quarter - and a decrease of 32 basis points from last year. This the lowest seriously delinquent rate since the third quarter of 2000. The seriously delinquent rate decreased 19 basis points for conventional loans, decreased four basis points for FHA loans, and increased six basis points for VA loans from the previous quarter. Compared to a year ago, the seriously delinquent rate decreased by 36 basis points for conventional loans, decreased 35 basis points for FHA loans and decreased eight basis points for VA loans.
Only 14 percent of all seriously delinquent loans were originated in 2016 or later. However, 25 percent of FHA seriously delinquent loans were originated in 2016 or later.
The three states with the largest decreases in their overall delinquency rate were states impacted by weather in the previous quarter: Alabama (81 basis points), West Virginia (78 basis points), and Mississippi (73 basis points).