Consumers are steadily getting better at paying their mortgage with fewer and fewer loans moving into foreclosure, according to the Mortgage Bankers Association’s latest National Delinquency Survey.
The report found that the delinquency rate for mortgage loans on one- to four-unit residential properties decreased to a seasonally adjusted rate of 4.71% of all loans outstanding at the end of the first quarter of 2017. The delinquency rate was down nine basis points from the previous quarter, and was six basis points lower than one year ago.
The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure.
The NDS, which has been conducted since 1953, covers 38 million loans on one- to four- unit residential properties. Loans surveyed were reported by more than 100 lenders, including mortgage banks, commercial banks and thrifts.
Marina Walsh, MBA’s vice president of industry analysis, explained, “Mortgage delinquencies decreased overall in the first quarter of 2017, driven by a drop in both the FHA and VA delinquency rates from the previous quarter as the conventional delinquency rate held constant.”
On top of this, Walsh added that employment growth started 2017 on strong footing, with the economy adding 216,000 jobs in January and 232,000 jobs in February.
“Average hourly wage growth increased 2.8% over the year, and has maintained a generally increasing trend since late 2015. These fundamentals have helped to support the performance of all loan types – whether FHA, VA or conventional loans,” she stated.
However, there was a slight increase in foreclosure starts, with the percentage of loans on which foreclosure actions were started during the first quarter increasing two basis points from the previous quarter to 0.30%. This is also five basis points lower than one year ago.
Walsh stated that the increase in foreclosure starts marked the first rise since the fourth quarter of 2014, but this increase was accompanied by a sizable drop in loans that were 90 days or more past due.
“It is likely that legacy distressed loans were held in the late stage-delinquency bucket by factors such as resolution attempts and state-specific requirements, before eventually going into foreclosure status. All 50 states and the District of Columbia saw a decrease in the 90-day or more delinquency rate.”
In addition, the percentage of loans in the foreclosure process at the end of the first quarter was 1.39%, down 14 basis points from the fourth quarter and 35 basis points lower than one year ago.
The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, fell to 2.76%, a decrease of 37 basis points from last quarter, and a decrease of 53 basis points from last year.
Walsh concluded, “In addition, nearly all states had a decrease in the percentage of loans in foreclosure in the first quarter. The overall percentage of loans in the process of foreclosure was 1.39%, its lowest level since the first quarter of 2007. While judicial states still had more than three times the percent of loans in foreclosure as non-judicial states, that measure declined to the lowest level since the fourth quarter of 2007.”
Along the same lines, the S&P Dow Jones Indices and Experian released its newest S&P/Experian Consumer Credit Default Indices report, a measure of changes in consumer credit defaults, which includes first mortgage default rates.
The report defines a default as 90 days past due (dpd) or worse (i.e. 120 dpd, 180 dpd, foreclosure).
According to the report, the first mortgage default rate dropped six basis points to 0.69% in April.
“Default rates on first mortgages are steady as home prices continue to rise in most parts of the country and sales of both new and existing homes increase,” said David Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices.
“The level of outstanding mortgage debt bottomed in the second quarter of 2014 and has been increasing steadily since then. After almost three years, outstanding mortgage debt is 9% below the peak seen in the first quarter of 2008,” said Blitzer. “Some analysts question if continuing increases in home prices presage a new housing bubble. Given conditions in the mortgage markets, this is not a current concern.”