The delinquency rate for mortgage loans on one-to-four-unit residential properties increased to a seasonally adjusted rate of 4.36 percent of all loans outstanding at the end of the first quarter of 2020, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey.
The delinquency rate was up 59 basis points from the fourth quarter of 2019 and down 6 basis points from one year ago. The percentage of loans on which foreclosure actions were started in the first quarter fell by 2 basis points to 0.19 percent.
“The mortgage delinquency rate in the fourth quarter of 2019 was at its lowest rate since MBA’s survey began in 1979. Fast-forward to the end of March, and it is clear the COVID-19 pandemic is impacting homeowners. Mortgage delinquencies jumped by 59 basis points – which is reminiscent of the hurricane-related, 64-basis-point increase seen in the third quarter of 2017,” said Marina Walsh, MBA’s Vice President of Industry Analysis. “The major variances from the fourth quarter of 2019 to this year’s first quarter are tied to the increase in early-stage delinquencies for all loan types. For example, the 30-day FHA delinquency rate rose by 113 basis points, the second-highest quarterly ramp-up in the survey series. The 30-day VA delinquency rate rose by 78 basis points – the highest quarterly increase.”
The seriously delinquent rate in the first quarter decreased by 9 basis points and was down 29 basis points from a year ago. The foreclosure inventory rate – the percentage of loans in the foreclosure process – was at its lowest level last quarter since 1984. Foreclosure starts were down 2 basis points from the previous quarter.
“Mortgage delinquencies track closely with the U.S. job market. With unemployment rising from historical lows in early 2020 to a record 14.7 percent in April, it is inevitable that mortgage delinquencies would increase as well. 33.5 million U.S. workers applied for unemployment benefits in the past seven weeks, and with signs of economic distress continuing into the second quarter, mortgage delinquencies will likely further increase,” said Walsh.
According to Walsh, there may be a flattening in foreclosure starts in future quarterly surveys due to COVID-19-related foreclosure moratoria and borrower forbearance guidelines under the CARES Act. Almost 4 million homeowners are on forbearance plans as of May 3, but MBA’s survey asks servicers to report these loans as delinquent if the payment was not made based on the original terms of the mortgage – in the same manner that delinquency data is collected during natural disasters.
“Once foreclosure moratoria are lifted and forbearance periods end, borrower repayment and modification options, combined with year-over-year equity accumulation and home-price gains, may present alternatives to foreclosure for the millions of distressed homeowners affected by this unfortunate pandemic and economic crisis,” added Walsh.
Key findings of MBA’s First Quarter of 2020 National Delinquency Survey:
- Compared to the fourth quarter of 2019, the seasonally adjusted mortgage delinquency rate increased for all loans outstanding. By stage, the 30-day delinquency rate rose to 2.67 percent, a 50-basis-point increase that matches the third quarter of 2017 as the highest quarterly increase in the NDS series dating back to 1979. The 60-day delinquency rate increased 7 basis points to 0.77 percent, and the 90-day or more past due delinquency bucket increased 3 basis points to 0.93 percent.
- By loan type, the seasonally adjusted 30-day delinquency rate for conventional loans increased 30 basis points to 1.90 percent over the previous quarter. The FHA 30-day delinquency rate increased 113 basis points to 6.09 percent. The VA 30-day delinquency rate increased 78 basis points to 2.81 percent over the previous quarter.
- By loan type, the total delinquency rate (which includes 30-day, 60-day, and 90-day or more past due) for conventional loans increased 34 basis points to 3.16 percent over the previous quarter. The FHA delinquency rate increased 131 basis points to 9.69 percent, the highest level since the fourth quarter of 2017. The VA delinquency rate increased by 101 basis points to 4.65 percent over the previous quarter, the highest level since the first quarter of 2015.
- On a year-over-year basis, overall mortgage delinquencies decreased for total loans outstanding. However, there were differences by loan type. The delinquency rate decreased by 30 basis points for conventional loans, increased 76 basis points for FHA loans, and increased 28 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 first quarter was 0.73 percent, down 5 basis points from the fourth quarter of 2019 and 19 basis points lower than one year ago. This is the lowest foreclosure inventory rate since 1984.
- The seriously delinquent rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 1.67 percent – a decrease of 9 basis points from last quarter – and a decrease of 29 basis points from last year. The seriously delinquent rate decreased 7 basis points for conventional loans, decreased 18 basis points for FHA loans, and decreased 12 basis points for VA loans from the previous quarter. Compared to a year ago, the seriously delinquent rate decreased by 35 basis points for conventional loans, decreased 16 basis points for FHA loans, and decreased 7 basis points for VA loans.
- The five states with the largest increases in their non-seasonally adjusted 30-day delinquency rates were: New York (29 basis points), Alaska (24 basis points), Florida (23 basis points), Louisiana (22 basis points), and New Jersey (20 basis points).
- Note on Seasonal Adjustments: Most time series data is subject to seasonal variations, and data on the housing sector is no exception. In the case of mortgage delinquencies, first-quarter seasonal factors such as receipt of tax returns and bonuses tend to pull first-quarter early-stage delinquencies downward. It is therefore necessary to remove such seasonal effects from the data so that the underlying economic movements in the series can be better analyzed and clearly interpreted. The NDS uses the U.S. Census Bureau’s X-12-ARIMA Seasonal Adjustment Program for its national delinquency rates by loan type. However, foreclosure starts, foreclosure inventory, the seriously delinquent rate, and state-level delinquency data are not seasonally adjusted.