Mortgage delinquency rate nears historic low

August's rate of 2.79% is just 4 basis points higher than the historic low reached in May 2022

The overall mortgage delinquency rate declined to 2.79% in August from 3.6% in July, according to a report by Black Knight. The delinquency rate is just 4 basis points above the historic low of 2.75% in May 2022.

August saw 20,300 foreclosure starts, a 15% rise from July, but remained 44% below August 2019, holding well below pre-pandemic levels.

“August’s improvement in mortgage delinquencies was in part a natural correction following July’s calendar-related increate (spurred by the month ending on a Sunday) alongside continued broad-based improvement in serious delinquent inventory in the wake of the COVID-19 pandemic,” Andy Walden, vice president of enterprise research at Black Knight said.

A total of 1.489 million properties were in early-stage delinquencies, defined as borrowers who missed a single mortgage payment, which is a decrease of 3.61% from July. It’s more than a 30% drop from the same period in 2021. 

Some 567,000 properties were considered seriously delinquent, in which loan payments are more than 90 days past due, but not in foreclosure. That metric dropped 4.8% in August from the previous month and 136% year-over-year. 

While the overall national delinquency rate is near all-time lows, there are still 250,000 more seriously delinquent mortgages than there were at the onset of the pandemic, Walden said. 

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“There’s still plenty of wood to chop in order to get borrowers affected by the pandemic back on track in terms of making their mortgage payments,” he added. 

Mississippi had the highest rate of serious delinquency of 2.37% in August. Louisiana followed at 2.02% and Alaska was third at 1.72%. 

Prepayment activity edged up 1.5% due to calendar-related effects from the prior month, but is down 69% from August 2021 as rising rates continue to put downward pressure on both purchase and refinance lending. 

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