The delinquency rate on residential mortgage loans backed by Fannie Mae declined across the board in 2014 due to a number of reasons that include foreclosure alternatives, home retention solutions, completed foreclosures, improved loan payment performance, and acquisitions of loans with stronger credit profiles, according to Fannie Mae's recently released annual report.
About 1.47 percent of mortgage loans backed by Fannie Mae were 30 to 59 days delinquent as of December 31, 2014 – a decrease from 1.64 percent at the end of 2013 and from 1.96 at the end of 2012. For loans that were 60 to 89 days delinquent, the percentage dropped from 0.66 percent at the end of 2012 to 0.49 percent in 2013 and down to 0.43 percent as of December 31, 2014.
On loans that were "seriously delinquent," or 90 days or more past due, the percentage has also been steadily falling – from 3.29 percent in 2012 down to 2.38 percent in 2013 to 1.89 percent as of December 31, 2014. The percentage of seriously delinquent loans that were delinquent for more than 180 days dropped from 73 percent at the end of 2013 to 70 percent at the end of 2014, and the percentage of seriously delinquent loans that were more than two years delinquent dropped from 36 percent at the end of 2013 down to 34 percent at the end of 2014.
The single-family serious delinquency rate has declined every quarter since the first quarter of 2010, according to Fannie Mae.
Fannie Mae cites one of the reasons for improvement in loan performance as stronger credit profiles of loans the Enterprise has acquired since 2009. Those loans make up about 81 percent of Fannie Mae's single-family guaranty book of business.
Although the serious delinquency rate for loans backed by Fannie Mae has decreased, it is decreasing at a slower pace, which is a trend that the Enterprise expects will continue.
"Our single-family serious delinquency rate and the period of time that loans remain seriously delinquent continue to be negatively impacted by the length of time required to complete a foreclosure in some states," Fannie Mae wrote in the report. "High levels of foreclosures, changes in state foreclosure laws, new federal and state servicing requirements imposed by regulatory actions and legal settlements, and the need for servicers to adapt to these changes have lengthened the time it takes to foreclose on a mortgage loan in a number of states, particularly in New York, Florida and New Jersey. Longer foreclosure timelines result in these loans remaining in our book of business for a longer time, which has caused our serious delinquency rate to decrease more slowly in the last few years than it would have if the pace of foreclosures had been faster."
In addition to the slow pace of foreclosures in some areas, other factors that influence the serious delinquency rate of loans include loan modifications, home price changes, unemployment levels, and other macroeconomic conditions. Fannie Mae said it expects the number of seriously delinquent single-family loans in the Enterprise's book of business to "stay above pre-2008 levels for years."