Calculated Risk: MBA: Mortgage Delinquency Rate increases in Q3 mainly due to Hurricanes

Friday, November 17, 2017

by Bill McBride on 11/17/2017 10:41:00 AM

The delinquency rate for home loan on one-to-four-unit homes increased to a seasonally changed rate of 4.88 percent of all loans outstanding at the end of the third quarter of 2017. The delinquency rate was up 64 basis points from the previous quarter, and was 36 basis points higher than one year back, inning accordance with the Mortgage Bankers Association’s (MBA) National Delinquency Survey.The percentage of loans on which foreclosure actions were begun throughout the third quarter was 0.25 percent, a decrease of one basis point from the previous quarter, and five basis points lower than one year earlier. The delinquency rate includes loans that are at least one payment overdue however does not include loans in the process of foreclosure. The portion of loans in the foreclosure procedure at the end of the third quarter was 1.23 percent, down 6 basis points from the previous quarter and 32 basis points lower than one year ago.The serious delinquency rate, the percentage of loans that are 90 days or more overdue or in the process of foreclosure, was 2.52 percent in the third quarter, up 3 basis points from the previous quarter, but 44 basis points lower than one year ago.Marina Walsh, MBA’s Vice President of Market Analysis, used

the following commentary on the study:” In the 3rd quarter of 2017, the overall delinquency rate rose by 64 basis
points over the previous quarter, with the 30-day delinquency rate accounting for 50 basis points of this variance. Hurricanes Harvey, Irma and Maria triggered disturbances and destruction in many states. Florida, Texas, surrounding states, along with devastated Puerto Rico, saw substantial increases in their past due rates. While forbearance remains in location for lots of debtors impacted by these storms, our study asks servicers to report these loans as overdue if the payment was not made based on the initial regards to the home mortgage despite any forbearance plans in place.” Mortgage delinquencies increased across all loan types– FHA, VA and standard– on a seasonally-adjusted basis.

The FHA delinquency rate increased to 9.40. percent from 7.94 percent in the 2nd quarter, a 146 basis-point increase and the highest quarter-over-quarter boost reported in the history of our study. The VA delinquency rate increased 52 basis indicate 4.24 percent from 3.72 percent in the 2nd quarter. The standard delinquency rate increased 50 basis indicate 3.97 percent from 3.47 percent in the 2nd quarter.”While the storms played a critical factor in explaining the increase in the total delinquency rate, there are other factors to think about, specifically given

delinquency rate increases in other states not straight impacted by the storms. First, there were timing concerns connected with the last day of the month being a Saturday. Processing for home loan payments made over the weekend did not take place till Monday, October 2 and hence these home mortgage payments were recognized as 30-days overdue per NDS meanings.”Second, delinquency rates were currently at historic lows in the 2nd quarter of 2017. The FHA and VA delinquency rates were at their least expensive levels considering that 1996 and 1979 respectively, while the

conventional delinquency rate reached its least expensive level given that 2005. It would not be unanticipated for delinquencies to ultimately increase from these levels. …” It will likely take about 3 or 4 more quarters for the effects of the most current hurricanes on the survey results to dissipate. That said, we see loan performance as still healthy and strong, supported by a positive work and wage outlook. Therefore far in 2017, job growth is averaging 169,000 tasks per month, joblessness rate has decreased from 4.8 to 4.1 percent, and wage development is 3.8 percent on a year over year basis.”focus included Click on graph for bigger image.This graph shows the percent of loans overdue by days past due.The percent of loans 30 and 60 days overdue increased in Q3, primarily due to the hurricanes.The 90 day pail increased in Q3, and remains a little elevated.The percent of loans in the foreclosure procedurecontinues to decrease, and

is close to typical levels.

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