Serious Delinquency Rate Continues its Decline


The most recent results of the National Delinquency Survey produced by the Mortgage Bankers Association (MBA) show that, as of the 4th quarter of 2018, mortgage servicers serviced 29.9 million non-government-insured mortgages, also known as conventional mortgages. Beginning with the first quarter of 2017, the MBA had discontinued its long-held classification of conventional loans into the prime and subprime categories, owing to the change in the mortgage servicing landscape following the 2008-09 economic recession.

Despite the changes in the mortgage servicing landscape, the National Delinquency Survey continues to provide a tally of the delinquency status of past due mortgage payments, including those that are “seriously delinquent”, that is, the percentage of non-seasonally adjusted loans that are 90+ days delinquent or in the process of foreclosure. In 2018, the non-seasonally adjusted serious delinquency rates of conventional and government-insured loans largely fell, following the downward trajectory since leaving the recession. Government-insured loans encompass FHA and VA loans. As of the 4th quarter of 2018, the serious delinquency rate of conventional loans was 1.7%. The serious delinquency rate on FHA loans maintained a level constantly above that of conventional loans, but followed the same trend, as shown in the following figure.

The data also show that the volume of new 90+ days past-due delinquent loans on FHA mortgages have sharply risen in 2018 to flows that have not been seen since 2013. Nonetheless, as the first figure shows, the seriously delinquent rate has been constantly decreasing, implying that, despite the sharp increases in the classification of loans into 90+ past due status, the clearing out of existing 90+ days past-due loans outpaces the aforementioned increases.

The chart above shows the distribution of new 90+ day delinquencies by reason by the year of their first occurrence. This information is collected by FHA and published in its monthly report on the Single-family Loan Performance Trends. While the 1st quarter of 2019 is still in progress, the summary of results from 2018 show a surge in the “Other” category of new FHS single-family loan delinquencies. This category covers a swath of non-traditional, miscellaneous reasons for loans going into 90+ day past-due status1. Apart from this category, there was a moderate increase in delinquencies owing to borrowers having excessive obligations.

1. This miscellaneous category, according to the HUD’s report, includes abandonment of property, distant employment transfer, neighborhood problems, property problems, inability to sell or rent property, military service, business failure, casualty loss, energy-environment cost, servicing problems, payment adjustment, payment dispute, transfer of ownership pending fraud and incarceration.

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