A modest increase marks a shift in the housing finance landscape
The last quarter of 2023 saw a noticeable uptick in mortgage delinquencies, signaling a shift in the housing finance landscape, as revealed in the Mortgage Bankers Association’s (MBA) latest findings.
The rate of delinquencies for loans on one-to-four-unit residential properties rose to 3.88% of all loans outstanding, showing a modest increase from the third quarter yet an improvement from the year prior. This rate remains low compared to the historical average of 5.25%, since 1979.
“While the overall delinquency rate is still very low compared to the historical average, the pace of new loans entering delinquency picked up and some loans moved into later stages of delinquency. The resumption of student loan payments, robust personal spending, and rising balances on credit cards and other forms of consumer debt, paired with declining savings rates, are likely behind some borrowers falling behind at the end of 2023,” said Marina Walsh, MBA’s vice president of industry analysis.
Despite the uptick in delinquencies, the labor market’s robustness provides a silver lining with an unemployment rate steady at 3.7% in January. However, Walsh cautioned that the labor market’s resilience is “strongly correlated” with mortgage performance.
“Any weakening in employment conditions would likely lead to more borrowers falling behind on their payments in the coming quarters,” Walsh said.
MBA’s detailed breakdown of delinquency rates showed a slight rise in 30-day delinquencies and more pronounced increases in 60-day and 90-day delinquencies. In particular, FHA loans saw a significant jump in delinquencies, reaching levels not seen since the third quarter of 2021. Meanwhile, year-over-year data revealed a general decrease in delinquencies across all loan types, albeit with a slight increase in FHA loan delinquencies.
Foreclosure actions remained stable during this period, with the rate of loans entering the foreclosure process unchanged. The percentage of loans in the foreclosure process witnessed a decline, hitting its lowest level since the fourth quarter of 2021.
The report also had a remarkable finding: the seriously delinquent rate—representing loans 90 days or more past due or in foreclosure—matched its lowest level since 1984, offering a sign of long-term improvement in loan performance.
Regionally, states like Louisiana, West Virginia, Illinois, Texas, and New Mexico experienced the most significant quarterly increases in delinquency rates.
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