The National Delinquency Survey (NDS), a
quarterly measure of mortgage performance from the Mortgage Bankers Association
(MBA), found delinquencies in the fourth quarter of 2017 had increased both quarter
over quarter and year-over-year. The NDS
findings echo those from Black Knight which were released earlier in the week, reflecting
significant impact from the September and October hurricanes.
The national delinquency rate on one-to-four-unit
dwellings increased to a seasonally adjusted rate of 5.17 percent at the end of
the quarter. This includes loans that
are at least one payment past due but does not include loans in the process of
foreclosure. The fourth quarter rate represented an increase of 29 basis
points (bps) compared to the third quarter of 2017 and was 37 bps higher than
at the end of the same quarter in 2016.
Hurricanes Irma, Harvey, and Maria struck principally
in Gulf Coast Texas, Florida, and Puerto Rico respectively. Parts of Louisiana
were impacted by Harvey, and Irma also affected Coastal Georgia. The storms hit
in late September (Q3) into late October; Black Knight and other sources noted
a rise in early delinquencies starting in October.
MBA notes that, by the end of the fourth
quarter delinquencies in the 30+ days bucket dropped by 15 points as borrowers
affected by the hurricanes either became current on their payments or moved to
later stages of delinquency. The serious delinquency rate, the percentage of
loans that are 90 days or more past due or in the process of foreclosure, was
2.91 percent in the fourth quarter, an increase of 39 basis points from Q3, but
22 basis points lower than the previous fourth quarter.
Marina Walsh, MBA's Vice President of
Industry Analysis said, "While the earliest-stage delinquency rate
dropped, the 60-day and 90-day delinquency rates did increase in the fourth
quarter of 2017. Despite the hurricanes and these quarter-over-quarter
results, most states are seeing overall mortgage delinquency rates at lower
levels than a year ago."
The rate of foreclosure starts during the
quarter was 0.25 percent, the same rate as in the third quarter and 3 bps lower
than a year earlier. The percentage of
loans in the foreclosure process, i.e. the foreclosure inventory, at the end of
the fourth quarter was 1.19 percent, down 4 bps and 34 bps from the two earlier
periods.
Walsh credited the storm-related
foreclosure moratoria put in place by Freddie Mac, Fannie Mae, the VA and FHA as
playing a large role in keeping foreclosure starts at bay and preventing an
increase in the foreclosure inventory. She
added, "As forbearance periods expire, an increase in the percent of loans in
foreclosure is likely. We anticipate it will be several more quarters
before the effects of the September hurricanes on the survey results dissipate,
especially given extended forbearance periods."
Mortgage delinquencies increased across
all loan types - FHA, VA and conventional - on a seasonally-adjusted basis. The
rise in delinquencies from the third to fourth quarter of 2017 are primarily
tied to 90+ day delinquencies for all loan types, but particularly FHA
loans. Compared to the third quarter of 2017, the 90+ day delinquency
rate on FHA loans rose by 75 basis points, versus 29 basis points for VA loans
and 27 basis points for conventional loans."
"The FHA overall delinquency rate in the
fourth quarter of 2017 is higher compared to the fourth quarter of 2016 in all
but three states. FHA borrowers appear to be impacted not only by the
storms but other factors that could be stretching their ability to make
payments," Walsh continued. "Regardless of the hurricanes, an increase in
delinquencies - particularly FHA delinquencies - off historic lows is not particularly
surprising given the seasoning of the loan portfolio, expected higher interest
rates, declining average credit scores on new FHA endorsements since 2014 and
rising debt-to-income ratios. Mitigating factors include low unemployment
and increasing home equity levels that provide homeowners with more options to
cure a potential default."