FHA loans posted a substantial decline in delinquencies during the third quarter, leading an overall improvement in loan performance.  The Mortgage Bankers Association said its National Delinquency Survey found the non-current rate for mortgage loans on one-to-four- unit residential properties was 3.97 percent.  This was 56 basis points (bps) below the rate in the second quarter and 50 bps lower compared to the third quarter of 2018. Foreclosure starts were also down 4 bps to 0.21 percent of all mortgage loans.

Marina Walsh, MBA's Vice President of Industry Analysis, said "Mortgage delinquencies decreased in the third quarter across all loan types - conventional, VA, and in particular, FHA.  The FHA delinquency rate dropped 100 basis points, as weather-related disruptions from the spring waned. The labor market remains healthy and economic growth has been stronger than anticipated. These two factors have contributed to the lowest level of overall delinquencies in almost 25 years."

Added Walsh, "Looking ahead, we do continue to monitor the credit profile of new FHA loans, as changes to this profile can have a noticeable impact on future delinquency rates."

It was the lowest seasonally adjusted mortgage delinquency rate since the first quarter of 1995.  The rate for loans that were 30 or more days past due fell 42 bps from the second quarter to 2.20 percent and the 60-day rate was down 6 bps to 0.75 percent. Seriously delinquent loans, those 90 or more days past due, improved by 8 bps to a rate of 1.02 percent.  The delinquency rates do not include loans in the foreclosure inventory, that is loans in the process of foreclosure.

All loan types had double digit declines in their rates in a single quarter led, as Walsh said, by the 100-bps decline in FHA rates. Those loans still had by far the highest rate at 8.22 percent.  The conventional loan rate fell 61 bps to 3.00 percent and the VA rate was down 31 bps to 3.93 percent. On a year-over-year basis, total mortgage delinquencies decreased for all loans outstanding with a decline of 56 bps for conventional loans,  74 bps  for FHA loans, and 23 bps for VA loans.

The percentage of loans in the foreclosure inventory at the end of the third quarter was 0.84 percent, down 6 bps from the second quarter and 15 bps lower than one year ago. This is the lowest foreclosure inventory rate since the fourth quarter of 1985.

There was a decrease of 14 bps quarter-over-quarter in the rate of loans in the seriously delinquent bucket, down 32 bps from last year and the lowest 90-day plus rate since the third quarter of 2000. The rate was down 19 bps for conventional loans, and 4 bps for FHA loans however, the VA rate rose 6 bps from Q2.  Compared to a year ago, the seriously delinquent rate decreased by 36 basis points for conventional loans, decreased 35 basis points for FHA loans and decreased eight basis points for VA loans.

The majority of delinquent loans are of pre-2016 vintage. Only 14 percent of those that are seriously delinquent were originated in 2016 or later although a quarter of FHA loans were closed in that recent period.

The three states posting the greatest improvement in their delinquency rate were all impacted by weather events in previous quarters. The rate fell 81 bps in Alabama, 78 bps in West Virginia, and 73 bps in Mississippi.