Declining unemployment rates and rising home prices have helped reduce delinquency rates, according to Archana Pradhan, Senior Professional, Economist at CoreLogic. In her blog titled “Mortgage Delinquency Rates for All Loan Types Continue to Fall”, Pradhan indicated that the serious delinquency rate for September 2018 was 1.5 percent, representing a 0.4 percentage point decline compared with September 2017.
The blog based on information from the CoreLogic Performance Index revealed that the serious delinquency rates for Federal Housing Administration (FHA), U.S. Department of Veterans Affairs (VA), and conventional loans were 3.7, 1.9 and 1.1 percent as of September 2018—representing an 11-year low.
CoreLogic data shows the serious delinquency rate for FHA loans is more than three times higher than the serious delinquency rate for conventional loans, partly because of the rise in FHA to conventional refinancing since 2013, Pradhan said. FHA to conventional refinances accounted for about 10 percent of all refinances in 2017 compared to 2 percent in 2012.
Pradhan pointed out that a closer look reveals that today’s delinquency rates are influenced by older loans, wherein about 67 percent of the conventional loans that were seriously delinquent in September 2018 were originated between 2003 and 2009 compared to just 23 percent of seriously delinquent conventional loans originated between 2010 and 2018. About 48 percent of the FHA loans and 69 percent of VA loans that were seriously delinquent were originated between 2010 and 2018, the blog indicated.
According to CoreLogic, the delinquency rates were much higher for all loan types originated between 2006 and 2008. An improvement in all types of loans recorded gradual improvement in delinquency rates were much higher for all loan types originated between 2006 and 2008. Performance of all types of loans started to improve gradually beginning with the 2009 vintage as the underwriting standards tightened and the economic recovery began mid-2009
Another key finding of the report was that loans originated in 2015 and 2016 have performed the best, with the lowest 15-month delinquency rate in a decade. The affordable loans originated in the past three years have a significantly lower delinquency rate than the FHA and VA loans. In fact, the serious delinquency rate for affordable housing loans is only a little bit higher than that of conventional loans.
Read the full report here.