Delinquency rates for mortgage loans on one-to-four-unit residential properties shrank across the board to 5.47% in the second quarter, according to a Mortgage Bankers Association survey published this week.
Compared to the previous quarter, the delinquency rate dropped 91 basis points and was down a whopping 275 bps from a year ago.
The results are welcome news and run counter to worries that gained traction last year that elevated levels of delinquencies would result in a slew of foreclosures. This prediction no longer seems to be the case.
The category that caused the most unease at the beginning of the pandemic was the 90-day delinquency bucket, which dropped by 72 bps to 3.53% in the second quarter (a record decline), the MBA said.
Meanwhile, the 30-day delinquency rate decline by 4 bps to 1.41% and the 60-day delinquency category declined by 15 bps to 0.52%. Both buckets are at their lowest levels in the history of the survey, the trade group said.
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Marina Walsh, vice president of industry analysis at the MBA, noted that the recovery is being driven by several factors “including improved employment and other economic conditions, the availability of home retention workout options after forbearance, and a strong housing market that is bringing additional alternatives to distressed homeowners.”
Across loan categories, the total delinquency rate for conventional loans dipped by 68 bps from the previous quarter to 3.89%, the MBA said. While the delinquency rates for FHA and VA loans also tumbled from the previous quarter to 12.77% (decline of 190 bps) and 6.47% (115 bps decline), respectively.
Walsh remarked that mortgage delinquencies across all three loan types reached their lowest levels since the first quarter of 2020 and that FHA loans and VA loans experienced the largest quarterly decline in the history of MBA’s survey (which dates back to 1979).
The percentage of loans in the foreclosure process at the end of the second quarter slightly dipped to 0.51%, down 3 basis points from the first quarter and 17 bps lower year-over-year, the survey said.
States with the largest decline in their overall delinquency rate from the previous quarter included Idaho (152 bps), Nevada (105 bps), Florida (94 bps), Hawaii (81 bps) and New Jersey (85 bps).
Walsh added that the foreclosure moratoria, which was still in place through the second quarter, resulted in the lowest foreclosure inventory recorded since 1981.
“Once the foreclosure moratoria lift, and forbearance plans expire over the course of the next several months, we expect many homeowners to take advantage of available workout options to avoid the foreclosure process,” she said.