According to the Mortgage Bankers Association’s (MBA) 2020 fourth quarter National Delinquency Survey (NDS), on a seasonally adjusted basis, the percentage of loans past due decreased from 7.65% in the third quarter to 6.73%.
State-level data of the past due loan category reveal that California and Texas made up the top two states with the greatest number of past due loans in the fourth quarter, at 284,000 and 250,000, respectively. Yet the largest reduction in the number of past due loans was achieved by Florida, registering a decline of 47,000. Florida also had the third highest number of past due loans. In relative terms, Louisiana and Puerto Rico had the highest % of loans that were past due, i.e., of all loans serviced, at 10.3% and 9.6%, respectively.
Also worth noting in the NDS is the “seriously delinquent” loan category, defined as the loans that are either 90 or more days past due or in the process of foreclosure. These data are not seasonally adjusted. As the percentage of loans in the “seriously delinquent” category decreased in the fourth quarter to 5.03%, it also declined by count to about 2 million loans, declining by about 50,000 loans.
A phenomenon to note in the NDS data has been the lagged nature of loans in the “seriously delinquent” category. Unlike the percentage of loans in the ‘past due’ category, which in general experienced a spike in Q2 2020 and tapered through the rest of 2020, the percentage of “seriously delinquent” loans peaked in Q3 and tapered in the subsequent quarter. Recently, the U.S. Department of Housing and Urban Development (HUD) extended COVID-19 foreclosure and forbearance moratoriums for FHA and USDA loans to June 30, 2021.
The percentage of FHA loans in the seriously delinquent category was much greater in 2020 than during the Great Recession, while the other loan categories’ “serious delinquency” rates were well below Great Recession levels. Furthermore, FHA-backed loans were the only loan category to have experienced a quarterly increase in “serious delinquency” following Q3 2020, i.e., in the fourth quarter, from 10.8% to 11.2%. This rate should improve as the labor market continues to recover.
Of all 50 states, the District of Columbia, and Puerto Rico, the MBA reported only 8 states as having reduced seriously delinquent rates in the fourth quarter of 2020. Interestingly, New Jersey, despite being among those 8 states, had the second highest seriously delinquent rate at 15.1%.