The delinquency rates for State Housing Finance Agencies declined in 2013 – the first time in four years – signaling improving conditions for the sector, says Moody’s Investors Service.
The Moody’s “State HFA Delinquencies Declining” report shows delinquencies fell even as foreclosure rates rose, largely because of increases in states with judicial foreclosure systems. (Related: Mortgage delinquency risks rise.)
“There is a backlog of foreclosures, which will continue to reduce revenue for the HFAs,” says Eileen Hawes, a Moody’s assistant vice president and analyst. “However, the HFAs are well positioned to absorb the losses from foreclosures, given their solid financial positions.”
Moody’s says the improvement in loan delinquencies reflects slowly improving employment in the US and the rise in home prices, which leaves fewer HFA borrowers “under water” or with negative equity on their loans.
The state and federal loan modification and loss mitigation programs the HFAs have been administering to help keep loan payments affordable have also contributed to the improvement.
At year-end 2013, the 60-90 day delinquency rate was 2.05%, a nearly 6% decrease from the 2.18% at year-end 2012. The 90+ day delinquency rate was 3.12% at year-end 2013, down 1.6% from the 3.17% rate at year-end 2012.
“The declines, particularly in the 60-90 days delinquencies, signal improvement in the HFA portfolio performance going forward,” Hawes said. “As delinquencies decline, fewer loans will enter the foreclosure process, which typically results in losses to the HFAs upon sale of the property.”
Foreclosures rates increased to 2.76% at year-end 2013, an 11.1% increase from 2.48% at year-end 2012. The performance of HFA portfolios in states requiring a judicial process for loans in foreclosure drove the rise, says Moody’s, as the courts in these states work through a considerable backlog.