Mortgage delinquencies edge slightly higher from record lows

MBA: Rise not unexpected

Despite a rise in the mortgage delinquency rate in the fourth quarter of 2016, the slight uptick follows a record-low third-quarter report, according to the Mortgage Bankers Association’s national delinquency survey.

The report stated the delinquency rate for mortgage loans on one-to-four-unit residential properties increased to a seasonally adjusted rate of 4.80% of all loans outstanding at the end of the fourth quarter of 2016. This is up 28 basis points from the previous quarter and is three basis points higher than one year ago.

Meanwhile, the foreclosure starts rate decreased two basis points, falling to its lowest level since 1988. Plus, foreclosure starts in the fourth quarter decreased across all loan types: FHA, VA and conventional.

The overall foreclosure inventory dropped by two basis points, and remained at its lowest level since 2007.

“We saw a mixed set of results in the most recent survey. Mortgage delinquencies increased in the fourth quarter for the first time since 2013, while both new foreclosure starts and the percentage of loans in foreclosure continued to decline,” said Marina Walsh, MBA’s vice president of industry analysis.

However, it’s important to keep the data in perspective, as Walsh stated.

While the overall delinquency rate in the fourth quarter increased across all loan types, FHA, VA and conventional, as compared to the third quarter, Walsh said, “It should be noted that last quarter’s overall delinquency rate was at its lowest level since 2006.”

“It is not unexpected that delinquencies could eventually increase off such a low base. We continue to see strong fundamentals in the overall economy, such as rising home values and increased employment, which bodes well for the future performance of FHA, VA and conventional loans,” she said.

Breaking apart the different loans types, the seasonally-adjusted FHA delinquency rate increased to 9.02% in the fourth quarter from 8.30% in the third quarter (its lowest level since 1997).

Walsh attributed the increase to the FHA 30-day delinquency category, which increased 55 basis points over the quarter.

The seasonally adjusted VA delinquency rate increased to 4% in the fourth quarter from 3.89% in the third quarter (its lowest level since 1979). However, on a yearly basis, the VA delinquency rate declined 12 basis points.

In addition, the seasonally adjusted conventional delinquency rate increased to 4.04% in the fourth quarter from 3.76% in the third quarter. On a year-over-year basis, the conventional delinquency rate increased by 6 basis points.

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