Mortgage Delinquencies Decrease In Q2

The delinquency rate for mortgage loans on one-to-four-unit residential properties decreased to a seasonally adjusted rate of 5.47 percent of all loans outstanding at the end of the second 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 91 basis points from the first quarter of 2021 and down 275 basis points from one year ago.

“Mortgage delinquencies across all loan types – conventional, FHA, and VA – reached their lowest levels since the first quarter of 2020,” said Marina Walsh, CMB, MBA’s Vice President of Industry Analysis. “The drop in the delinquency rate for FHA loans and VA loans was the largest quarterly decline for both in the history of MBA’s survey dating back to 1979.”

Walsh added, “Much of the second-quarter improvement can be traced to later-stage delinquent loans – those 90 days or past due, but not in foreclosure. In fact, the 90-day delinquency rate dropped by 72 basis points, which is another record decline in the survey. It appears that borrowers in later stages of delinquency are recovering due to several factors, including improved employment and other economic conditions, the availability of home retention workout options after forbearance, and a strong housing market that is bringing additional alternatives to distressed homeowners.”

Walsh noted that foreclosure moratoria were still in place through the second quarter, resulting in the lowest foreclosure inventory recorded since 1981.

“Once the foreclosure moratoria lift, and forbearance plans expire over the course of the next several months, we expect many homeowners to take advantage of available workout options to avoid the foreclosure process,” said Walsh.

Key findings of MBA’s Second Quarter of 2021 National Delinquency Survey:

• Compared to the first quarter of 2021, the seasonally adjusted mortgage delinquency rate decreased for all loans outstanding. By stage, the 30-day delinquency rate decreased 5 basis points to 1.41 percent and the 60-day delinquency rate decreased 15 basis points to 0.52 percent, both at their lowest levels in the history of the survey. The 90-day delinquency bucket decreased 72 basis points to 3.53 percent. 
• By loan type, the total delinquency rate for conventional loans decreased 68 basis points to 3.89 percent over the previous quarter. The FHA delinquency rate decreased 190 basis points to 12.77 percent, and the VA delinquency rate decreased by 115 basis points to 6.47 percent. 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 279 basis points for conventional loans, decreased 288 basis points for FHA loans, and decreased 158 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 second quarter was 0.51 percent, down 3 basis points from the first quarter of 2021 and 17 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 second quarter remained unchanged from last quarter at 0.04 percent.
• 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 at 4.03 percent. It decreased by 67 basis points from last quarter and decreased by 23 basis points from last year. The seriously delinquent rate decreased 47 basis points for conventional loans, decreased 152 basis points for FHA loans, and decreased 57 basis points for VA loans from the previous quarter. Compared to a year ago, the seriously delinquent rate decreased by 61 basis points for conventional loans, increased 152 basis points for FHA loans, and increased 104 basis points for VA loans.
• The five states with the largest decreases in their overall delinquency rate from last quarter were: Hawaii (81 basis points), New Jersey (85 basis points), Florida (94 basis points), Nevada (105 basis points), and Idaho (152 basis points).
• Note: An estimated 1.6 million homeowners were on forbearance plans as of August 8, 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.