Delinquency rates experienced an increase in Q3 2017 for mortgage loans on one-to-four-unit residential properties, according to the MBA’s National Delinquency Survey. At a seasonally adjusted rate of 4.88 percent of all loans outstanding, the rate was up 64 basis points from Q2 2017 and 36 basis points higher from Q3 2016.
Foreclosure action starts represented 0.25 percent of all loans in Q3, a one basis point decrease from the previous quarter and five basis point decrease from a year ago.
According to Marina Walsh, MBA's VP of Industry Analysis, Q3 2017 Hurricanes Harvey, Irma and Maria caused disruptions and destruction in numerous states. Florida, Texas, neighboring states, as well as devastated Puerto Rico, saw substantial increases in their past due rates.
“In future surveys, we may see a temporary drop in foreclosure starts in hurricane-impacted states due to storm-related foreclosure moratoria, as was seen during Hurricane Katrina in 2005,” Walsh said.
The seriously delinquent rate, which combines loans that are 90 days or more past due with those loans in the process of foreclosure, was 2.52 percent in the third quarter, up 3 basis points from the previous quarter, but 44 basis points lower than one year ago.
Mortgage delinquencies increased on a seasonally adjusted basis. The FHA delinquency rate increased to 9.40 percent from 7.94 percent in the second quarter, a 146 basis-point increase and the highest quarter-over-quarter increase reported in the history of our survey.
Other delinquency increases included conventional (3.97 percent in Q3 2017, 3.47 percent Q2 2017), and VA (4.24 percent in Q3 2017, 3.72 Q2 2017).
"While the storms played a critical factor in explaining the rise in the overall delinquency rate, there are other factors to consider, especially given delinquency rate increases in other states not directly impacted by the storms,” Walsh said.
The first factor noted was the timing issues associated with the last day of the month being a Saturday. Second, delinquency rates were already at historic lows in Q2 2017.
Meanwhile, other considerable factors include seasonality, rising loan-to-value and debt-to-income ratios for certain product types, normal loan aging, and declining average credit scores on new FHA endorsements since 2014 as the agency has withdrawn from its counter-cyclical role during the crisis.