Mortgage delinquency rate drops in first quarter

The delinquency rate for mortgage loans on residential properties fell to 4.71 percent at the end of the first quarter of 2017, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey.

The rate was down nine basis points from the previous quarter, and was six basis points lower than one year ago.

“Mortgage delinquencies decreased overall in the first quarter of 2017, driven by a drop in both the FHA and VA delinquency rates from the previous quarter as the conventional delinquency rate held constant,” Marina Walsh, MBA’s vice president of industry analysis, said. “Employment growth started 2017 on strong footing, with the economy adding 216,000 jobs in January 2017 and 232,000 jobs in February. Average hourly wage growth increased 2.8 percent over the year, and has maintained a generally increasing trend since late 2015. These fundamentals have helped to support the performance of all loan types – whether FHA, VA or conventional loans.”

The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 2.76 percent, a decrease of 37 basis points from last quarter, and a decrease of 53 basis points from last year.

The conventional delinquency rate held steady at 4.04 percent in the first quarter, while the VA delinquency rate dropped to 3.90 percent from 4.00 percent in the fourth quarter.

“Typically, in the fourth quarter of any given year, we see a rise in delinquencies because of higher heating costs and holiday spending,” Walsh said. “This increase is usually reversed in the first quarter. While MBA uses a seasonal adjustment model to mitigate these predictable seasonal effects, this particular six-month period showed larger than expected swings.  First quarter results indicate that the increase in FHA delinquencies that we saw in the last quarter of 2016 has not been established as an ongoing trend.”

The percentage of loans on which foreclosure actions were started was 0.30 percent in the first quarter, an increase of two basis points from the previous quarter, but five basis points lower than one year ago.

The percentage of loans in the foreclosure process was 1.39 percent, down 14 basis points from the fourth quarter and 35 basis points lower than one year ago. It is at its lowest level since the first quarter of 2007.

“We saw an increase in foreclosure starts for the first time since the fourth quarter of 2014, but this increase was accompanied by a sizable drop in loans that were 90 days or more past due,” Walsh said. “It is likely that legacy distressed loans were held in the late stage-delinquency bucket by factors such as resolution attempts and state-specific requirements, before eventually going into foreclosure status. All 50 states and the District of Columbia saw a decrease in the 90-day or more delinquency rate.”