Natural disasters impacted delinquency data in some states
According to the Mortgage Bankers Association's National Delinquency Survey, the delinquency rate for mortgage loans on one-to-four-unit residential properties rose to a seasonally adjusted rate of 4.47 percent of all loans outstanding at the end of the third quarter of 2018.
The delinquency rate was up 11 basis points from the previous quarter, but down 41 basis points from one year ago. The percentage of loans on which foreclosure actions were started dropped one basis point from the last quarter to 0.23 percent - its lowest level since the fourth quarter of 1985.
"Despite the small uptick this quarter, the healthy economy is overall supporting low mortgage delinquencies and foreclosure inventories," said Marina Walsh, Vice President of Industry Analysis at MBA. "Unemployment is at its lowest level since 1969, wages have grown 3.1 percent year-over-year - the biggest jump in almost a decade - and job growth is averaging over 212,000 jobs per month thus far."
Walsh notes that natural disasters are a major factor in determining whether borrowers make timely mortgage payments. Specifically, there were significant delinquency increases in states adversely impacted by Hurricane Florence and Tropical Storm Gordon, including North Carolina, South Carolina, Mississippi, Arkansas and Alabama. Hurricane Michael, which made landfall after the survey reporting period, will not be reflected until MBA's fourth quarter survey. Walsh believes it will likely take several quarters for the most recent storms' effects on the survey results to dissipate.
"The impact of the August and September 2017 hurricanes on several states, particularly Texas and Florida, continues to retreat," said Walsh. "Primarily because of the declining effects of last fall's hurricane-related spike, the overall mortgage delinquency rate in the third quarter was down 41 basis points on a year-over-year basis."
Key findings of MBA's Quarterly National Delinquency Survey
In relation to the second quarter of 2018, the 30-day delinquency rate increased 20 basis points to 2.51 percent, the 60-day delinquency rate increased 2 basis points to 0.77 percent, and the 90-day delinquency bucket dropped 11 basis points to 1.18 percent.
In relation to the second quarter of 2018, mortgage delinquencies rose across all loan types. The delinquency rate for conventional loans increased 11 basis points to 3.56 percent over the previous quarter. The FHA delinquency rate increased 26 basis points to 8.96 percent, and the VA delinquency rate increased by 19 basis points, to 4.16 percent, over the previous quarter.
On a year-over-year basis, mortgage delinquencies dropped across all loan types. The delinquency rate for conventional loans dropped by 41 basis points, while the FHA and VA delinquency rates dropped 44 basis points and 8 basis points, respectively, 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 0.99 percent, down 6 basis points from the second quarter of 2018 and 24 basis points lower than one year ago. This was the lowest foreclosure inventory rate since the second quarter of 2006.
The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 2.13 percent - a decrease of 17 basis points from last quarter - and a decrease of 39 basis points from last year.
The five states with the largest increases in non-seasonally-adjusted mortgage delinquency rates over the previous quarter were all impacted by the September 2018 storms: North Carolina (80 basis points), South Carolina (77 basis points), Mississippi (77 basis points), Arkansas (63 basis points) and Alabama (50 basis points).
Both Texas and Florida continue to recover from the September 2017 hurricanes. The non-seasonally-adjusted overall mortgage delinquency rate in Texas dropped 190 basis points from last year to 5.48 percent in the third quarter. In Florida, the non-seasonally-adjusted overall mortgage delinquency rate on all loans dropped 243 basis points from last year to 4.59 percent.