Out of Their Reach

The numbers sure look rosy. To begin with, the 30-plus delinquency rate, the most comprehensive measure of mortgage performance, is near a 10-year low. In May 2016, the rate totaled 5.3 percent. By contrast, 4.5 percent of mortgages were delinquent by at least 30 days or more this May, including those in foreclosure.

A 0.8-percentage-point dampening in the overall delinquency rate is clearly a step in the right direction. But there’s more to it than meets the eye, so says Frank Nothaft, Chief Economist at CoreLogic, in the company’s May 2017 Loan Performance Insights report.

“Strong employment growth and home price increases have contributed to improved mortgage performance,” Nothaft said. “Early-stage delinquencies are hovering around 17-year lows, and the current-to-30-day-past-due transition rate remained low at 0.8 percent. However, the same positive economic conditions helping performance have also contributed to lack of affordable supply, creating challenges for homebuyers.”

In a similar vein, a protracted period of relatively tight underwriting standards has driven down mortgage delinquencies to pre-crisis levels, said CoreLogic President and CEO Frank Martell. As of this May, the foreclosure inventory rate stood at 0.7 percent compared with 1 percent in May 2016.

Defined as 90 days or more past due, including loans in foreclosure, serious delinquencies are also on a downslope. Except for Alaska and North Dakota, which both recorded increases, each of the remaining states noted a decrease in its serious delinquency rate.

All that positivity comes with a caveat, Martell cautioned: “As pressure to relax underwriting standards increases, the industry needs to proceed carefully and take progressive, sensible actions that protect hard-fought improvements in mortgage performance.”

Tempering aside, the numbers presage a robust future for the servicing sector, the report contends: “The continued improvement in mortgage performance bodes well for the health of the U.S. market in 2017.