The Economy, Employment, Rising Home Prices Whittle Away at Delinquencies

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Improving loan performance doesn’t make headlines any
longer, but worth noting that the improvement is still good news.  The Mortgage Bankers Association (MBA) says
the first quarter of 2018 saw even more progress in reducing delinquencies,
improvement noted across all categories of distress.  The MBA’s National Delinquency Survey shows a
54-basis point (bp) reduction in the overall delinquency rate compared to the
fourth quarter of 2018 to a seasonally adjusted annual rate of 4.63
percent.  It is also an 8-bps decline since
the first quarter of last year.

Delinquencies
were down in all stages on a quarter-over-quarter basis.  The 30-day bucket dropped 27 bps while the 60-day and 90-day delinquency buckets
retreated 9 and 18 basis points respectively.

The delinquency rate
does not include loans in the process of foreclosure. That rate at the end of
the first quarter was 1.16 percent, down 3 bps and 23 bps from the fourth
quarter and year-ago rates respectively. This was the lowest foreclosure
inventory rate since the third quarter of 2006. Economic factors and increasing
home equity levels contributed to the decline in the foreclosure inventory, but
extended hurricane related foreclosure moratoria probably played a part in the historic
low levels as well.

Foreclosures were
started on 0.28 percent of active loans. 
This was a 3-bps increase from the fourth quarter but was down 2 bps from
one year ago.

“Mortgage delinquencies
decreased from the previous quarter across all loan types – conventional, VA, and
in particular, FHA – as the effects of the September hurricanes dissipated,”
according to Marine Walsh, MBA’s Vice President of Industry Analysis.

“The strong economy, low
unemployment rate, tax refunds and bonuses and home price appreciation were key
factors that helped push delinquencies down in the first quarter. Of course,
there are offsetting factors that may put upward pressure on delinquency rates
in future quarters, including: a difficult recovery for some borrowers in
hurricane-impacted states
; the aging of loan portfolios; higher interest rates
that limit a borrower’s rate-term refinance options; higher energy prices;
stretching of housing affordability given limited supply; and the easing of
credit overlays as mortgage market conditions have changed.”  

The FHA delinquency rate
fell 136 basis points over the previous quarter – the largest single-quarter
decline ever reported to the National Delinquency Survey.  Despite this, the FHA delinquency rate was up
93 basis points year over year. The conventional and VA delinquency rates were
also down from the previous quarter, by 41 bps and 17 bps respectively.  Conventional loan delinquencies declined 26
bps on an annual basis, but VA loans saw a 42-bps increase compared to a year
earlier.  

MBA said the two states
most heavily affected by last fall’s hurricanes, Texas and Florida, appear to
be past the worst
in terns of storm-related delinquencies.  The non-seasonally-adjusted overall mortgage
delinquency rate in Texas dropped by 171 basis points to 5.62 percent in the
first quarter, not quite as low as the last completed reporting period prior to
Hurricane Harvey when it was 5.05 percent.   In
Florida, the rate has dropped 230 basis points to 6.59 percent. Prior to
Hurricane Irma the state’s overall delinquency rate was 4.07 percent.  Four
out of the top five states with the highest serious delinquency rates had been impacted
to some degree by the hurricanes; Florida, Mississippi, Louisiana and Texas.
The remaining state was New Jersey. 



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