Mortgage Delinquencies Increase In The Third Quarter Of 2023

The delinquency rate for mortgage loans on one-to-four-unit residential properties increased to a seasonally adjusted rate of 3.62 percent of all loans outstanding at the end of the third quarter of 2023, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey.

The delinquency rate was up 25 basis points from the second quarter of 2023 and up 17 basis points from one year ago. The percentage of loans on which foreclosure actions were started in the third quarter rose by 1 basis point to 0.14 percent.

“The national mortgage delinquency rate increased in the third quarter from the record survey low reached in the second quarter of this year, with an uptick in delinquencies across all loan types – conventional, FHA, and VA,” said Marina Walsh, CMB, MBA’s Vice President of Industry Analysis. “The increase was driven entirely by a rise in earliest-stage delinquencies – those 30-days and 60-days past due. Later-stage delinquencies – those 90 days or more past due – declined to the lowest level since the first quarter of 2020.”

Added Walsh, “The decline in later-stage delinquencies, along with a foreclosure starts rate of 0.14 percent – which is well below the historical quarterly average of 0.40 percent – suggest that distressed homeowners may be utilizing available loss mitigation options that prevent a foreclosure start. Additionally, accumulated home equity may also be enabling some homeowners to sell their homes well before foreclosure becomes a possibility.”

Mortgage delinquencies and employment conditions continue to track very closely, according to Walsh. The labor market has shown recent signs of weakening, with the unemployment rate increasing to 3.9 percent in October, the highest level since January 2022. MBA forecasts slower hiring and rising unemployment, with the rate rising to 5.0 percent by the end of next year.

“The increase in unemployment will likely mean further increases in mortgage delinquencies, particularly for FHA borrowers,” said Walsh.

Key findings of MBA’s Third Quarter of 2023 National Delinquency Survey:

• Compared to last quarter, the seasonally adjusted mortgage delinquency rate increased for all loans outstanding. By stage, the 30-day delinquency rate increased 28 basis points to 2.03 percent, the 60-day delinquency rate increased 7 basis points to 0.62 percent, and the 90-day delinquency bucket decreased 9 basis points to 0.98 percent. 
• By loan type, the total delinquency rate for conventional loans increased 21 basis points to 2.50 percent over the previous quarter. The FHA delinquency rate increased 55 basis points to 9.50 percent, and the VA delinquency rate increased by 6 basis points to 3.76 percent.
• On a year-over-year basis, total mortgage delinquencies increased for all loans outstanding. The delinquency rate decreased by 2 basis points for conventional loans, increased 98 basis points for FHA loans, and increased 5 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 0.49 percent, down 4 basis points from the second quarter of 2023 and down 7 basis points lower than one year ago. This is the lowest foreclosure inventory rate since fourth-quarter 2021.
• 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 1.52 percent, the lowest level since 1984. It decreased by 9 basis points from last quarter and  decreased by 38 basis points from last year. The seriously delinquent rate decreased 5 basis points for conventional loans, decreased 37 basis points for FHA loans, and decreased 16 basis points for VA loans from the previous quarter. Compared to a year ago, the seriously delinquent rate decreased by 31 basis points for conventional loans, decreased 92 basis points for FHA loans, and decreased 52 basis points for VA loans.
• The five states with the largest quarterly increases in their overall delinquency rate were: South Dakota (124 basis points), New Mexico (61 basis points), Hawaii (54 basis points), Mississippi (49 basis points), and Louisiana (49 basis points).