Serious Delinquency Rates Continue to Fall

In its quarterly National Delinquency Survey, the Mortgage Bankers Association reported that 3.29% of 1-4 family mortgages were seriously delinquent in the first quarter of 2016. Measured on a not seasonally adjusted basis, the rate of serious delinquency, which includes both mortgages that are 90 or more days past due and mortgages in foreclosure, was 0.95 percentage point less than the 4.24% recorded in the first quarter of 2015. Since reaching a peak of 9.7% in the fourth quarter of 2009, the serious delinquency rate has experienced a steady decline. The current rate of serious delinquency was last seen in 2007.

The decline in the overall serious delinquency rate partly reflects a falling rate on conventional mortgages. Conventional mortgages include both prime and subprime mortgages. In the fourth quarter of 2009, the share of conventional mortgages that were considered seriously delinquent reached its zenith at 9.8%. Since then, the proportion of conventional mortgages considered seriously delinquent has steadily fallen, reaching 3.0%. However, despite the long decline, the serious delinquency rate on conventional mortgages remains above its 2005-2006 average, 1.6%.

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The decrease in the serious delinquency rate overall also reflects a drop in the rate on government loans. Government loans include both FHA-insured and VA-guaranteed mortgages. Although the rate of serious delinquency on government loans also peaked in the fourth quarter of 2009, it did not begin to record a sustained decline until 2012. As of the first quarter of 2016, the serious delinquency rate on government mortgages was 4.3%, 1.3 percentage points greater than the serious delinquency rate on conventional mortgages and 1.0 percentage point above the overall serious delinquency rate. Although the serious delinquency is higher than the rate on conventional mortgage, it is lower than its average level between 2005 and 2008.

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According to information provided by the Senior Loan Officer Opinion Survey (SLOOS), in recent years, the decline in the serious delinquency rate has coincided with the easing of lending standards on net. Net lending standards represent the difference between the share of senior loan officers reporting that standards had eased over the quarter and the percentage answering the standards had tightened. A positive percentage means that standards have eased while a negative percentage denotes tightening.

As shown in Figure 2 above, the rate of net easing on GSE-eligible loans has remained relatively stable since the fourth quarter of 2014, the first quarter of this series. In contrast, net lending standards on government mortgages have been more volatile. Lending standards on government mortgages were easing, on net, between the fourth quarter of 2014 and the second quarter of 2015. Since then, standards on government mortgages have stopped easing, on net. In the third quarter of 2015, lending standards on government mortgages tightened and then then remained neutral over the past two quarter.



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1 reply

  1. Hi Michael — doing some research on this topic and was hoping to pick your brain about the serious delinquincies calculation. Trying to determine an average number per year to make an estimate for 2017, and want to make sure it includes foreclosure data. Is that something you’d be able to help with? Greatly appreciate it!

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