Mortgage delinquencies inch up in Q3 as job market cools: MBA

Delinquency rates increased across all loan types during the third quarter

Total mortgage delinquencies rose slightly in the third quarter of 2023 as the job market cools and inflation puts more pressure on homeowners. However, delinquency rates are still well below historical averages, according to new data from the Mortgage Bankers Association (MBA). 

Delinquent home loans on one- to four-unit properties rose to 3.62% of all outstanding mortgages in Q3, up from 3.37% the previous quarter and 3.45% a year ago, according to MBA’s National Delinquency Survey.

“The increase was driven entirely by a rise in earliest-stage delinquencies – those 30-days and 60-days past due. Later-stage delinquencies – those 90 days or more past due – declined to the lowest level since the first quarter of 2020,” Marina Walsh, MBA’s vice president of industry analysis, said in a news release.

The 90-day delinquency rate fell to 0.98% in the third quarter, down from 1.07% in Q2, the survey found. Meanwhile, the delinquency rates for loans 60 days past due (0.62%) and 30 days past due (2.03%) increased quarter over quarter in Q3 from 0.55% and 1.75%, respectively. 

Over the third quarter, the total delinquency rate for conventional loans reached 2.5%, up from 2.29% in Q2. Meanwhile, FHA delinquency rate saw a larger jump to 9.5%, up from 8.95% the previous quarter. The VA delinquency rate reached 3.76%, up from 3.70% in Q2.

South Dakota, New Mexico, Hawaii, Mississippi, and Louisiana posted the largest quarterly increases in their overall mortgage delinquency rates. 

Additionally, the percentage of loans in the foreclosure process rose by  0.14%, up from 0.13% in Q2. However, that’s notably lower than the historical quarterly average of 0.40%.

As delinquency and foreclosure rates remain reasonably low, Walsh said that homeowners might have used loss-mitigation options to prevent foreclosure. Another explanation is that equity-rich homeowners might be selling their homes  before foreclosure becomes a necessity. 

Mortgage delinquencies track labor data closely

The October jobs report revealed that the unemployment rate rose to 3.9% — the highest level since January 2022. The MBA forecasts slower hiring and rising unemployment by the end of 2024, with unemployment expected to hit 5%.

“The increase in unemployment will likely mean further increases in mortgage delinquencies, particularly for FHA borrowers,” Walsh said.

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