The ongoing improvement in mortgage performance hit a slight snag in the third quarter of 2018, one that appears to be disaster related.  The Mortgage Bankers Association (MBA) said the National Delinquency Survey found the national delinquency rate grew by 11 basis points (bps) from the second quarter to 4.47 percent.  This was, however an improvement of 41 bps from the same quarter in 2017.  Foreclosure starts continued to decline, dropping 1 bp quarter-over-quarter to 0.23 percent, its lowest level since, not just the recession, but 1985.

All loan types saw increased delinquencies for the quarter but were down year-over-year.  For the quarter, the rate for conventional loans was also up 11 bps to 3.56 percent while the FHA rate rose 26 bps and the VA rate 19 bps to 8.96 percent and 4.16 percent.  Those three rates were the result of annual declines of 41, 44, and 8 bps respectively.

"Despite the small uptick this quarter, the healthy economy is overall supporting low mortgage delinquencies and foreclosure inventories," said Marina Walsh, Vice President of Industry Analysis at MBA. "Unemployment is at its lowest level since 1969, wages have grown 3.1 percent year-over-year - the biggest jump in almost a decade - and job growth is averaging over 212,000 jobs per month thus far."

Walsh notes that natural disasters are a major factor in determining whether borrowers make timely mortgage payments. Specifically, there were significant delinquency increases in states adversely impacted by Hurricane Florence and Tropical Storm Gordon, including North Carolina, South Carolina, Mississippi, Arkansas and Alabama. Hurricane Michael, which made landfall after the survey reporting period and caused significant damage in the Florida Panhandle and Southern Georgia, will not be reflected until MBA's fourth quarter survey. Walsh believes it will likely take several quarters for the most recent storms' effects on the survey results to dissipate.

"The impact of the August and September 2017 hurricanes on several states, particularly Texas and Florida, continues to retreat," said Walsh. "Primarily because of the declining effects of last fall's hurricane-related spike, the overall mortgage delinquency rate in the third quarter was down 41 basis points on a year-over-year basis."

The 30-day delinquency rate increased by 20 bps to 2.51 percent and the 60-day tick up to 0.77 from 0.75 percent. Long term delinquencies were down however; the 90-day bucket declined by 11 bps to 1.18 percent. These figures do not include loans in the process of foreclosure which represented 0.99 percent of all mortgages in the third quarter, down 6 bps from the second quarter and 24 from a year earlier. It was the lowest rate for the foreclosure inventory since early 2006.

The five states with the largest increases in non-seasonally-adjusted mortgage delinquency rates over the previous quarter were all impacted by the September 2018 storms: North Carolina (80 basis points), South Carolina (77 basis points), Mississippi (77 basis points), Arkansas (63 basis points) and Alabama (50 basis points).